Tesco 2007 Annual Report Download - page 24

Corporate governance
Directors’ report on corporate governance
Tesco PLC is committed to the highest standards of corporate
governance. We recognise that good governance helps the
business to deliver strategy, generate shareholder value and
safeguard shareholders’ long-term interests. We believe that
the Combined Code is a useful guide from which to review
corporate governance within the Group. This statement
describes the Board’ s approach to corporate governance.
Board composition and independence
As at 24 February 2007, the Board of Tesco PLC comprised
seven Executive Directors, seven independent Non-executive
Directors and Mr D E Reid, Non-executive Chairman.
Mr R F Chase is Deputy Chairman and Senior Independent
Non-executive Director. Miss Lucy Neville-Rolfe joined the
Board in December 2006 and will submit herself for election
by shareholders at the AGM in June 2007.
Both Mr C L Allen and Dr H Einsmann have served on the
Board for more than two three-year terms. The Chairman
conducted a thorough review with each Director to assess
their independence and contributions to the Board and
confirmed that they both continue to be effective independent
Non-executive Directors. Mr C L Allen brings large corporate
operational experience and knowledge of the media industry
and provides leadership for the Remuneration Committee.
Through his wealth of business experience Dr H Einsmann
contributes a different dimension to the Board in terms of
international marketing, brand building and human resource
development.
The Chairman has primary responsibility for running the
Board. The Chief Executive, Sir Terry Leahy, has executive
responsibilities for the operations, results and strategic
development of the Group. Clear divisions of accountability
and responsibility exist and operate effectively for these
positions.
The Board requires all Non-executive Directors to be
independent in their judgement. The structure of the Board
and integrity of the individual Directors ensures that no one
individual or group dominates the decision-making process.
Biographies for the Board Directors can be found on pages
46 and 47 of the Annual Review and Summary Financial
Statement 2007.
Board responsibilities
The Board normally meets eight times a year and annually
devotes two days to a Board conference, including senior
executives, which discusses current performance and longer-
term planning, including evaluating the opportunities and
risks of future strategy. The Board has set out a clear Schedule
of Matters Reserved for Board Decision in order to ensure its
overall control of the Group’s affairs. These include the
approval of financial statements, major acquisitions and
disposals, authority levels for expenditure, treasury policies,
risk management, Group governance policies and succession
planning for senior executives.
All Directors have access to the services of the Company
Secretary and may take independent professional advice
at the Company’s expense in conducting their duties. The
Company provides insurance cover and indemnities for its
Directors and officers.
For all new Directors, a personalised induction programme is
designed to develop their knowledge and understanding of the
Group’s culture and operations. On appointment, the Director
will liaise with the Chairman and the Company Secretary to
ensure the programme is appropriately tailored to their
experience, background and particular areas of focus. It usually
includes an overview of the business model, Board processes,
one-to-one meetings with the Executive team and briefings
with senior managers, an induction to Board Committees that
the new appointee will serve on, a briefing on social, ethical
and environmental issues for the business and site visits at
home and abroad.
The need for Director training is regularly assessed by the
Board and up-skilling sessions for the whole Board take place
at least once a year. This year Board training included sessions
on the operations and governance of our property activities.
In the coming year the Board proposes to hold training
sessions focusing on the Tesco Operating Model as well as
on the implications of climate change for the business. To
better facilitate the Directors’ understanding of the Group’s
international operations, the Board usually holds at least
one meeting overseas each year.
Board processes
The Board governs through clearly identified Board
Committees to which it delegates certain powers. The Board
itself is serviced by the Company Secretary, who reports to the
Chairman in respect of his core duties to the Board. The Board
Committees are the Executive Committee, Audit Committee,
Remuneration Committee and Nominations Committee. They
are properly authorised under the constitution of the Company
to take decisions and act on behalf of the Board within the
parameters laid down by the Board. The Board is kept fully
informed of the work of these Committees. Any issues requiring
resolution will be referred to the full Board. A summary of
the operations of these Committees is set out below. The
effectiveness of the Audit, Remuneration and Nominations
Committees is underpinned by their Non-executive Director
membership which provides independent insight on
governance matters. Copies of each of the Committee’s
Terms of Reference are available on the website
www.tesco.com/corporate or at the AGM.
Executive Committee The Board delegates responsibility
for formulating and implementing the strategic plan and for
management of the Group to the Executive Committee. This
Committee meets formally every week and its decisions are
communicated throughout the Group on a regular basis. The
Executive Committee comprises the seven Executive Directors
and is chaired by the Chief Executive. A number of senior
executives also attend the Committee and their valuable
operational experience helps broaden the debate. Their
22 Tesco PLC Annual report and financial statements 2007 Find out more at www.tesco.com/corporate