Marks and Spencer 2016 Annual Report Download - page 32

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MARKS AND SPENCER GROUP PLC
DIRECTORS’ REPORT
GOVERNANCE
CHAIRMAN’S
GOVERNANCE OVERVIEW
During the year the Board has placed much
focus on operational delivery, succession
planning and risk management. The
following pages provide insight into these
activities alongside the Board’s discussions
and governance processes.
An open and balanced review of our
business performance has been covered
earlier on pages 02 to 29. As highlighted,
although we made headway against a
number of the priorities we set ourselves
at the start of the year, our performance in
Clothing & Home and International remains
unsatisfactory, despite the signifi cant
e ort from the teams in these areas of
the business. The last two years have seen
a signifi cant improvement in our clothing
gross margin, delivered through improved
design capabilities, smarter buying, a more
fl exible supply base and growth in our
international reach. However, we recognise
that we have more work to do to deliver
sustained performance in Clothing & Home
and International. These will both be key
areas of focus for the year ahead.
A key area of Board discussion and
challenge this year centered on improving
the performance and risk management
of our website and the Castle Donington
distribution centre. The Board was pleased
with the signifi cant improvement in the
operations of these over the critical
Christmas period. Better process
management and controls, and extensive
testing by the team leading up to
the intensive peak trading period, was
a critical factor in this success. This focus
on delivering an improved customer
experience has underpinned a strong
performance from M&S.com and delivered
growth in market share.
Our balance sheet remains strong and
we are delivering well against our free
cashfl ow targets, even after returning
£451.7m to shareholders, via dividend
payments and the share buyback.
During the year the Board also discussed its
strategic priorities, operational delivery and
the associated key business risks and their
management. We have sought to provide
insight into the scope of the Board’s
activities, discussions and resulting actions
on pages 36 and 37 of this report.
Much thought has been given to our risk
appetite resulting in the agreement of
a formal set of Group level statements,
as discussed on page 48. We have also
spent time considering management of our
cyber and business continuity risks, these
will remain key items on the Board agenda.
SUCCESSION PLANNING AND CULTURE
This year has been particularly intensive
for both the Board and the Nomination
Committee relating to succession
planning and culture, assessing the
executive, non-executive and senior
succession pipeline, and identifying what
skills are needed to support our strategy
and business for the long-term.
Board and senior management succession
has been a regular feature of our Board
and Committee discussion over the last
fi ve years, with development and continued
assessment forming a key agenda item.
So, when Marc Bolland raised his potential
retirement with the Board, the Nomination
Committee was well prepared to ensure
a careful and systematic transition. This
process along with further detail on
the activities of the Nomination and
Remuneration Committees are provided
on pages 40 to 41 and 50 to 71 respectively.
In reaching its conclusion to appoint
Steve Rowe as Chief Executive (CEO),
the Committee followed a rigorous
assessment, development and selection
process, including external benchmarking.
The Board was unanimous in supporting
Steve’s appointment in the light of his
considerable knowledge of the business
and its people, his appetite to continue
the process of change, his perceptive and
e ective problem solving, his values and his
observed leadership. The Board is grateful
to Marc for his planning, enabling the
Nominations Committee to work carefully
and systematically on his succession.
Leadership, culture and good governance
are essential considerations for our Board
as it seeks to build a business that can
deliver sustainable performance and
an organisation fi t for the longer term.
Steve has outlined on page 06 to 08 the
importance of customer focus, clarity,
simplicity, and better ways of working
to deliver on improved operational
performance.
As the business looks at how it can work
more e ectively, the Board recognises
the role it can play in demonstrating
leadership and tone from the top.
Following our Board evaluation last year,
we set out to articulate our Board culture
with an internal framework to identify how
we wanted to work as a Board and how
we wished to operate and behave as
a team. This has helped us to refl ect not
just on what we do but the way we do it.
Furthermore, it aligns the Board with M&S’s
internal performance management to
ensure that values and behaviours are
integral to our corporate DNA.
THIS REPORT’S KEY FEATURES
Over the next few pages we look at our
Board members, the role of the Board, its
performance and its oversight. We provide
an overview of the process undertaken to
ensure CEO succession and provide insight
into di ering induction programmes.
Following feedback on our 2015 report,
we again provide detail on the activities
and discussions undertaken during the year
by sharing some of the actions arising from
those discussions and the progress against
them. Given the timing of the change in
leadership, certain discussions pertaining
to future strategy and Board evaluation
were undertaken subsequent to year-end.
In the interest of transparency, to align with
previous years and provide clarity to the
reader, these have also been included in
the table on pages 36 and 37.
Our approach to succession has enhanced our ability
to replace and develop responsibilities quickly and
seamlessly, and improved our ability to react to both
planned and unplanned changes.
ROBERT SWANNELL CHAIRMAN
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