Marks and Spencer 2010 Annual Report Download - page 55

Operating & Financial review p16 
Governance 
Financial statements p78 
To find out more, visit marksandspencer.com/annualreport2010 51
Nomination & Governance Committee
We put a great deal of time and effort into finding the right CEO: we
spent considerable time with our external consultants, defining our
needs and reviewing prospective candidates. We managed a
thorough, orderly search and interviewed rigorously. I am confident
that as a result we’ve been successful in securing a strong CEO
in Marc Bolland. We also recommended the appointment of John
Dixon as an executive director, made changes to our Committee
membership and appointed a new Group Secretary.
We have given increased focus to leadership development
through the Lead to Succeed programme and strengthened our
performance management processes. We want to ensure we have
a high performing workforce to get us through the current tough
trading conditions. We want to be better at identifing tomorrow’s
leaders. Those demonstrating high potential qualities are included in
the business succession plan. We have also reviewed induction to
help our new joiners get off to the best start. For our part, we have
taken a rigorous approach to Board and committee performance
reviews. Prior to his appointment as an executive director, John
Dixon spent time with one of our non-executive directors to prepare
him for his wider accountabilities as a Board member.
Reflecting Stuart’s earlier comments, we reviewed how we can
make our governance more meaningful to our people in the
business so that we can all make sure we are doing the right thing,
the right way at Marks & Spencer.
Audit Committee
With the continuing changes in our business and the very challenging
economic climate, a key focus this year has been the Group’s
approach to risk, keeping a close eye on our financial performance
and strength. To enable the Board to make more informed decisions
on strategy and business priorities, we made our approach to risk
more dynamic and insightful, whilst keeping it simple and practical.
The Board confirmed that it would increase the time it spent on risk
appetite whilst continuing to rely on the Audit Committee for risk
oversight; therefore a separate risk committee is not required.
The effectiveness of our external auditors is key to giving us
confidence in the Group’s approach to controls and risk and to enable
us to recommend the reappointment of PricewaterhouseCoopers
LLP. We judge them on the quality of their audit findings,
management’s response and stakeholder feedback. We check on
their independence by making sure they are sufficiently challenging
on management. We also set the audit and non-audit fees (see
page 88) and make sure that our auditor engagement policy is
adhered to when commissioning non-audit work. Audit partner
rotation is important to retain the objectivity of the process – Stuart
Watson was appointed lead audit engagement partner in 2008/09.
We review the effectiveness of internal audit which focuses its
work on business priorities identified by the Group Risk Profile.
We track their key findings and the responsiveness of management.
To do this we made more time to meet with senior management to
understand how they run their businesses, mitigate their risks and
keep it all under control. The independence of internal audit is also
important. Paul Shearer was appointed Head of Internal Audit and
Risk in July 2009. He reports to the Group Secretary and has direct
access to me to support him in his role.
As a final safeguard, at the end of each meeting the Committee
holds separate meetings with the external and internal auditors,
without management present, to discuss their respective areas
and any issues arising from their audits.
Remuneration Committee
Our long-term philosophy is to attract and retain leaders who are
focused and encouraged to deliver business priorities within a
framework that is aligned with the interests of the Company’s
shareholders.
Our remuneration strategy continues to ensure that a significant
percentage of the package remains ‘at risk’. This approach has
informed the Committee’s considerations relating to Marc Bolland’s
remuneration on his appointment as the new Chief Executive,
to succeed Sir Stuart Rose.
The Committee agreed a salary and benefits package for Marc
which is consistent with the Company’s current remuneration
framework for executive directors. The salary is in line with existing
M&S remuneration policies and the external market, with the largest
part of the package ‘at risk’, as awards will only be received in the
event that the Annual Bonus Scheme pays out and if share grants,
made under the Company’s Performance Share Plan, hit challenging
targets throughout the next two to three years. The Committee
considers that payout at maximum levels under these schemes will
be as a result of significant outperformance by the business, with
substantial levels of return for investors. The Committee put in place
a recruitment package which fairly compensated Marc for his
awards that were forfeited with his previous employer and which the
Committee was fully satisfied would meet their performance targets
and pay out had Marc remained in their employ.
The Committee also agreed the remuneration for Stuart’s
transition to Chairman at the end of July 2010.
In 2009/10, the Company clearly outperformed the targets set both
in the internal operating plan and those expected by the City. This
level of performance resulted in a bonus being paid for the first time
in three years across the whole organisation. Given the economic
forecasts that prevailed at the start of this financial year, these
payments reflect significant performance both at an individual and
Company level.
For 2010/11, the targets for the Company’s long-term incentive
plan have been amended upward to ensure that they remain
challenging and at least as demanding as the targets set in previous
years.
The remuneration of the non-executive directors is determined
by the Chairman, Deputy Chairman and the executive directors.
Further information the Remuneration Committee’s activities are
given in the Remuneration report on pages 58-71.
Sir David Michels Committee Chairman
Jeremy Darroch Committee Chairman
Steven Holliday Committee Chairman