Marks and Spencer 2007 Annual Report Download - page 38

Corporate governance statement continued
Graham Oakley, Group Secretary, acts as a sounding board
to the Chairman and individual directors. He supports the
Chairman in ensuring the Board functions effectively and
fulfils its role. He is secretary of the Audit, Remuneration
and Nomination Committees and also heads the Corporate
Governance Group, which supports the Board and its
committees, as well as providing advice on a range of issues
to commercial colleagues.
The Board has a formal schedule of matters reserved for its
decision and delegates certain matters to committees as set
out below. The Board determines the overall Group strategy;
creation, acquisition or disposal of material corporate entities
or assets; development and protection of the brand; matters of
public interest that could affect the Group' s reputation; public
announcements including statutory accounts; significant
changes in accounting policy; capital structure and dividend
policy; operating plans and key performance indicators;
prosecution, defence or settlement of material litigation; Group
remuneration policy and Board structure, composition and
succession. The full schedule of matters reserved for the Board
can be found at www.marksandspencer.com/investorrelations
We are committed to our principles of Quality, Value, Service,
Innovation and Trust. Trust is earned from others as a result of
our commitment to long-held values and the way we behave.
Our Code of Ethics outlines the behaviours that M&S expects
from employees whether they are dealing with our customers,
suppliers, shareholders or colleagues. It also includes guidelines
on the environment, fraud and financial reporting and the
management of conflicts of interest. It is circulated to employees
on an annual basis and senior managers are required to sign
their annual acceptance of the Code of Ethics.
In addition, in January 2007 we announced Plan A, our
business wide ‘eco plan’ setting out our ambition to change the
way we operate over the next five years. Plan A is overseen by
the How we do business Committee whose role is described
on page 37.
Committees of the Board
The principal committees of the Board are the Audit,
Remuneration and Nomination Committees. The written terms
of reference of each committee can be found at
www.marksandspencer.com/investorrelations
Audit Committee
The Audit Committee comprises four independent non-
executive directors. Jeremy Darroch who is the Chief Financial
Officer of British Sky Broadcasting plc, took over the Chair of
the Committee on 1 September 2006. The other members
are Steven Holliday, Jack Keenan and Sir David Michels.
Jack Keenan will retire as a member when he retires from the
Board following the AGM on 10 July 2007. Kevin Lomax was
Chairman of the Committee until he retired from the Board on
31 August 2006. Sir David Michels joined the Committee
on 26 May 2006. Martha Lane Fox will join the Committee on
1 June 2007.
The Committee assists the Board in fulfilling its oversight
responsibilities. Its primary functions are:
• to monitor the integrity of the financial statements and other
information to shareholders;
• to review the systems of internal control and risk
management; and
• to maintain an appropriate relationship with the Company's
external auditors and to review the effectiveness and
objectivity of the audit process.
It met four times during the year and items reviewed include:
General Merchandise direct buying processes; General
Merchandise distribution centre operations; e-commerce; Food
buying; Food stock management; Food primary logistics; and
financial controls over sales, stock and cash. The Committee
received updates for Business Continuity Planning and Finance
systems implementation and reviewed the effectiveness of the
Group’s whistleblowing process. Private meetings have been
held separately with the external auditors and the Chief Internal
Auditor.
The Audit Committee keeps under review the independence
and objectivity of the external auditors, PricewaterhouseCoopers
LLP (‘PwC’), including the review of audit fee proposals and
non-audit fees. An engagement and fee approvals process is
in place which requires prior approval from the Committee for
some engagements and excludes others. In some cases, the
nature of the non-audit advice may make it more timely and
cost-effective to select PwC, who already have a good
understanding of the Group. PwC may also be appointed for
consultancy work, but only after rigorous checks, including
competitive tender, to confirm they are the best provider. PwC
is also subject to professional standards which safeguard the
integrity of the auditing role performed on behalf of
shareholders. As authorised by shareholders at the AGM in July
2006, the Audit Committee determines the level of remuneration
for the external auditors on behalf of the Board. Details of this
year's fees are given in note 4 to the financial statements.
The Board has satisfied itself that at least one member of the
Audit Committee has recent and relevant financial experience
and is confident that the collective experience of the members
enables them to act as an effective Audit Committee. The
Committee also has access to the financial expertise of the
Group and its auditors and can seek further professional advice
at the Company’s expense, if required.
36 MARKS AND SPENCER GROUP PLC www.marksandspencer.com/annualreport2007