Governance
David Reid retired on 30 November as Chairman and Sir Richard Broadbent succeeded him as Chairman.
The information below is an extract from our Annual Report for the year ending 26 February 2011.
David Reid, Chairman until 30 November 2011
Sir Richard Broadbent, Chairman from 30 November 2011
Introduction from the Chairman
Tesco performed strongly during the year 2010/11, whilst maintaining our strong culture of good governance and recognising the needs of our shareholders which has helped to build our business.
At Tesco PLC we are committed to the highest standards of corporate governance, as we recognise that strong governance is crucial in helping the business to deliver its strategy, generating shareholder value and safeguarding our shareholders’ long-term interests. We have been active in contributing to the debate on governance, and will continue to put forward our views on what constitutes good governance. As a demonstration of our commitment to corporate governance we have chosen to report against the new UK Corporate Governance Code (Code) before it applies to us fully.
The composition of our Board has been developed to ensure that the Company can benefit from the depth of experience, independence and knowledge of our Directors, whilst allowing the Board to discharge its duties effectively. We have rigorous director selection and evaluation processes, which include assessing their time commitments as well as their skills.
We have a solid and experienced leadership team, who are collectively responsible for the long-term success of the Company. We have a clear understanding of our roles and responsibilities in running the business and an honest and open environment in which both Executive and Non-executive Directors can constructively contribute to the development of the Company.
Compliance with the UK Corporate Governance Code
The Code set out main principles and specific provisions on how companies should be directed and controlled to follow good governance practice. The Financial Services Authority (FSA) requires 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.
The Board considers that Tesco PLC complied in full with the Code for the whole of the year ended 26 February 2011, with the exception of:
(i) Provision B.1.2 of the Code, which requires that at least half of the Board, excluding the Chairman, should comprise Non-executive Directors determined by the Board to be independent. The Board recognises the importance of a balanced board with an appropriate level of independence. Tesco had one more Executive Director than Non-executive Directors (excluding the Chairman) between July 2010 and the end of the financial year. However, following Sir Terry Leahy’s retirement and the appointment of Philip Clarke as his successor as CEO in March 2011, there is now an equal number of Executive and independent Non-executive Directors and the Board is again balanced and compliant with the relevant provisions.
(ii) Provision B.6.2 of the Code, which requires that every three years there should be an externally led evaluation of the Board’s performance. The Board usually carries out an external Board evaluation every three years, with internal evaluations in the intervening years. The last external evaluation took place in 2007 and an externally facilitated evaluation would normally have taken place this year. Given the extensive Board and senior management changes taking place this year, however, it was decided that it would be more appropriate to conduct an internal evaluation process and to carry out an externally facilitated process next year, once those changes have had an opportunity to bed in. Further information on the Code can be found at www.frc.org.uk.
We consider corporate governance critical to our business integrity and to maintaining investors’ trust.
