Tesco 2006 Annual Report Download - page 23

21Tesco plc
Nominations Committee In the light of assessment of Board
capability, the Nominations Committee leads the process for
Board appointments, re-election and succession of Directors
and the Chairman. The Committee is chaired by Mr D E Reid
and its members during the year were Mr C L Allen,
Mr R F Chase, Mrs K R Cook, Mr E M Davies, Dr H Einsmann,
Mr K J Hydon and Sir Terry Leahy. Where matters discussed
relate to the Chairman, the Senior Independent Non-executive
Director chairs the meeting. The Nominations Committee met
once in the year ended 25 February 2006 to discuss the
ongoing shape and capability of the Board. Following Graham
Pimlott’s retirement some minor changes were made to
Committee membership. Mrs K R Cook resigned from the Audit
Committee to join the Remuneration Committee and Ms C M
McCall joined the Audit Committee. The most recent additions
to the Board have made good progress with their induction
programmes and the other Non-executive Directors continue to
invest time in developing their understanding of the business.
All Directors have to submit themselves for re-election at least
every three years if they wish to continue serving and are
considered by the Board to be eligible. New Directors will be
submitted for election by shareholders in their first year.
Remuneration Committee The Remuneration Committee’s
role is to determine and recommend to the Board the
remuneration policy for the Executive Directors. It monitors the
level and structure of remuneration for senior management
and seeks to ensure that the levels and structure of
remuneration is designed to attract, retain and motivate the
Executive Directors needed to run the Company. Mr C L Allen
chairsthe Committee, which is composed entirely of
independent Non-executive Directors. Committee members
for the full year were Mr R F Chase, Mr E M Davies and
Dr H Einsmann. Mrs K R Cook joined the Committee in
September 2005. The responsibilities of the Remuneration
Committee and an explanation of how it applies the Directors’
remuneration principles of the Combined Code, are set out
in the Directors’ remuneration report on pages 25 to 38.
Audit Committee The Audit Committee’s primary
responsibilities are to review the financial statements, to
review the internal control systems including risk management,
to review the programme of Internal Audit, to consider the
appointment of the external auditors and their independence
and to review the Committee’s own effectiveness. The annual
schedule also includes a review of Protector Line, the
Company’s ‘whistle-blowing’ procedure.
Mr K J Hydon, who has recent and relevant financial
experience, chairs the Committee. The other Committee
members for the full financial year were Mr R F Chase and
Mr E M Davies. Mrs K R Cook resigned from the Audit
Committee to join the Remuneration Committee and was
replaced by Ms C McCall in September 2005. The Committee
consists entirely of independent Non-executive Directors.
At the invitation of the Committee, the Chairman of the Board,
the Finance Director, the Company Secretary, the Head of
Internal Audit and representatives of the external auditors
normally attend meetings. The Committee meets privately
with the external auditors at least once a year.
The Audit Committee’s Terms of Reference are reviewed
annually and represent current best practice. This year the
Committee met four times. To facilitate the members’
understanding of the Group’s international affairs, a special
meeting was held in Asia in 2005. The need for training is kept
under review and is formally considered by the Committee
annually. In 2005, the Committee set aside a full day to up-skill
the whole Board on topics such as changing regulation,
corporate governance, fraud and auditor ethical standards.
Training is also provided to meet specific individual needs.
Board performance evaluation The Board regularly reviews
its own performance. In 2005 the Chairman led a thorough
independent review of the performance of the Board and its
key Committees. The review concluded that the Board is highly
effective and that there had been significant improvements in
the Board’s culture, dynamics and administrative processes
during the year. Good progress has been made in implementing
the recommendations of this review and the Board agreed to
conduct an in-house review for the year ended 25 February
2006. The Chairman, assisted by the Company Secretary, met
with each of the Directors individually. The Directors again
found this to be an open, constructive and useful process and
the review found the Board to be highly effective.
The Chief Executive reviews the performance of each
Executive Director. The Chairman reviews the performance of
the Chief Executive and each Non-executive Director. During
the year, the Chairman met with the Non-executive Directors
without the Executive Directors present to discuss Board
issues and how to build the best possible team. The Senior
Independent Non-executive Director, Mr R F Chase, met with
the Non-executive Directors in the absence of the Chairman,
to assess the Chairman’s effectiveness.
The Board scheduled eight meetings in the year ended
25 February 2006 and ad hoc meetings were convened to
deal with urgent matters. The following table shows the
attendance of Directors at regular Board meetings and of
members at the Audit, Nominations and Remuneration
Committees during the year.