Marks and Spencer 2006 Annual Report Download - page 38

36 Marks and Spencer Group plc
Corporate governance continued
The success of this year’s approach has been primarily due to:
•combining internal expertise with external support which
ensured that the review was M&S focused, leading edge in
terms of methodology and cost-efficient;
•conducting one-to-one interviews, in addition
to a questionnaire; and
•keeping the process live after the survey, by integrating it
into the Board meeting agenda and the Chairman receiving
regular updates on its progress.
Given the changes to the Board over the last few months, and
with the pending change of Chairman, the Board has agreed
that the 2006/07 evaluation take place in autumn 2006.
Individual performance
The executive directors continue to have their performance
individually reviewed by the Chief Executive against set
objectives. Remuneration is directly linked to these reviews and
determined by the Remuneration Committee. Similarly, the Chief
Executive and Group Secretary’s performance is reviewed by
the Chairman. The Senior Independent Director reviews the
Chairman’s performance against a set of previously agreed
objectives. The performance of the non-executive directors is
reviewed individually by the Chairman. This year’s questionnaire
has also invited each director to comment on the individual
performances of themselves, other directors and the Chairman.
Succession planning and senior leadership development
Following a period of significant business change, and
agreement by the Board that management succession was a
key priority, the Board confirmed the need to review regularly
succession planning and leadership development at the top of
the organisation. It highlighted the need to raise the visibility of
talent across the organisation and ensure appropriate career
development plans are in place.
In January 2006 the Board reviewed:
•current successional and development plans for individuals
at Reward Level G (one level below Board);
•succession potential for the teams that report into Reward
Level G and information on our ‘high potential’ individuals
from lower down the organisation with examples of
development plans; and
•risk assessment and our future challenges.
Opportunities are provided for the non-executive and executive
directors to meet with business unit directors and our ‘high
potential’ individuals on a regular basis.
Accountability and audit
The Group’s overriding corporate objective is to maximise long-
term shareholder value whilst exceeding the expectations of our
customers, employees and partners. In doing so, the directors
recognise that creating value is the reward for taking and
accepting risk.
The Board has overall responsibility for the Group’s approach
to assessing risk and systems of internal control, and for
monitoring their effectiveness in providing shareholders with
a return that is consistent with a responsible assessment and
mitigation of risks. This includes reviewing financial, operational
and compliance controls and risk management procedures.
The role of executive management is to implement the Board’s
policies on risk and control, and to provide assurance on
compliance with these policies. Independent assurance is
provided by internal audit, which operates across the Group,
and the external auditors. All employees are accountable for
operating within these policies.
Because of the limitations that are inherent in any system of
internal control, this system is designed to manage, rather than
eliminate, the risk of failure to achieve corporate objectives.
Accordingly, it can only provide reasonable but not absolute
assurance against material misstatement or loss.
Risk assessment
Every six months the Board reviews the Group Risk Profile – the
tool that drives risk assessment and action planning. This is
supported by an on-going process for identifying, evaluating and
managing the significant risks faced by the Group. As an integral
part of planning and review, managers from each business area
and major projects:
•identify the risks to their plans;
•evaluate the risks using likelihood and impact; and
•document the actions being taken to manage those risks.
This process has been in place for the year under review and up
to the date of approval of the Annual report and accounts. It has
been regularly reviewed by the Board and accords with the
Internal Control Guidance for directors on the Code produced
by the Financial Reporting Council.