The information below is an extract from our Annual Report for the year ending 25 February 2012.
Sir Richard Broadbent, Chairman from 30 November 2011
Introduction from the Chairman
Our approach to governance begins with the recognition that it is not a set of rules but the framework supporting the core values which define what is and what is not acceptable. It is an expression of the way we want to conduct ourselves which informs actions and decisions whether or not there is a specific rule for the situation, and which supports the culture and behaviours that we wish to foster.
We are introduced a number of changes to our governance framework at the beginning of 2012/13 to keep it aligned with this vision and relevant to our growing business. The main features of the new arrangements are:
• a revised definition of Matters Reserved to the Board;
• an updated delineation of the roles of Chairman and Chief Executive;
• updated and expanded terms of reference for Board Committees;
• the elimination of a number of existing Committees and the creation of one new Committee to oversee Corporate Responsibility; and
• clarification of the role and structure of the independent Board of Tesco Bank and its relationship with the PLC Board.
A governance framework requires appropriate processes to support it, which achieve a balance between prompting thoughtful judgement when required and not stifling commercial behaviour through delay, risk aversion or rigidity. The new governance framework has given us the opportunity also to review the processes which support and underlie it and we are introducing a number of improvements in 2012/13.
Governance also requires the active and committed engagement of Board and management. The development of the Board, to ensure that its skills, balance and experience are optimum, is a continuous process and the developments of the past year are described more fully below. The Executive Committee and its upporting governance framework and processes have also been developed during the year by the Chief Executive, Philip Clarke.
We believe that these changes will enhance the way that the Group operates. Our aim is to ensure that the Group continues to benefit from structures and processes which support effective strategic debate and
questioning; appropriate monitoring of performance; the capacity to formulate the right questions; and the strength to hold difficult questions on behalf of shareholders.
Compliance with the UK Corporate Governance Code
The UK Corporate Governance Code (the ‘Code’) sets out the main principles and specific provisions on how companies should be directed and controlled to follow good governance practice. The rules of the Financial Services Authority (the ‘FSA’) require companies listed in the UK to disclose, in relation to the Code, how they have applied those principles and whether they have complied with the provisions throughout the financial year. Where the provisions have not been
complied with, companies must provide an explanation for this.
Provision B.1.2 of the Code requires at least half of the Board, excluding the Chairman, to comprise Non-executive Directors determined by the Board to be independent. Tesco has complied with this provision except for the first four days of the financial year, when it had one more Executive Director than Non-executive Directors (excluding the Chairman). However, following Sir Terry Leahy’s retirement and the appointment of Philip Clarke as his successor as CEO in March 2011, there has been at least an equal number of Non-executive and Executive Directors.
Prior to 2 March 2011 Philip Clarke was the Executive Director responsible for Asia, Europe & IT.
Provision B.6.3 of the Code requires the Non-executive Directors, led by the Senior Independent Director, to evaluate the performance of the Chairman, taking into account the views of Executive Directors. As the new Chairman, Sir Richard Broadbent, only assumed his role of Chairman on 30 November 2011, it has been adjudged too soon in his tenure to make a fair and reasonable assessment of his Chairmanship.
The Board considers that Tesco PLC complied in all material respects with the Code for the whole of the year ended 25 February 2012. Further information on Code can be found at www.frc.org.uk.