Annual report and financial statements 2008
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- Financial review
- Governance
- Remuneration report
- Financial statements
- Shareholder information
A year in review
View the year’s highlights in this short movie
Board committees
The principal Board committees are the Audit, Remuneration and Nomination Committees. The written terms of reference of each committee can be found in the investors section of our website at marksandspencer.com/thecompany.
Audit Committee
The Audit Committee comprises four independent, non-executive directors: Jeremy Darroch (Chairman), Martha Lane Fox, Steven Holliday and Sir David Michels. Martha joined the Board and became a member of the Committee on 1 June 2007 to replace Jack Keenan who retired on 10 July 2007.
The Audit Committee assists the Board in fulfilling its oversight responsibilities and its primary role is to monitor the integrity of the financial statements and other information to shareholders; to review the systems of internal control and risk management; to maintain an appropriate relationship with the Company’s external auditors; and to review the effectiveness and objectivity of the audit process.
It met four times during the year reviewing a number of internal audits relating to key business processes and the principal risks and uncertainties facing the Group. The Committee received updates on the governance process around business change initiatives and reviewed the Code of Ethics and whistleblowing returns. Private meetings have been held separately with the external auditors and internal audit.
The Board has satisfied itself that at least one member of the Audit Committee has recent and relevant financial experience and is confident that the collective experience of the members enables them to act as an effective Audit Committee. The Committee also has access to the financial expertise of the Group and its auditors and can seek further professional advice at the Company’s expense, if required.
The Board has appointed a new Head of Internal Audit and Risk, Claire Combes, who joined the Company on 6 May 2008. Following the departure on 31 July 2007 of the previous Head of Internal Audit, John Federer, the function has been led by the two Audit Managers who have had direct access to the Audit Committee Chairman.
The Committee keeps under review the independence and objectivity of the external auditors, PricewaterhouseCoopers LLP (‘PwC’), including the review of any audit fee proposals and non-audit fees. An engagement and fee approvals process is in place which requires prior approval from the Committee for certain engagements. On occasions, the nature of non-audit advice may make it more timely and cost-effective to select PwC, who already have a good understanding of the Group. PwC may also be appointed for consultancy work, but only after rigorous checks, including competitive tender, to confirm they are the best provider. PwC is also subject to professional standards which safeguard the integrity of the auditing role performed on behalf of shareholders. Arrangements have been made, in conjunction with PwC, for audit partner rotation in accordance with the recommendations of the Auditing Practices Board. The lead audit engagement partner, Ranjan Sriskandan, has been in place since 2003/04 and is being succeeded by Stuart Watson with effect from 2008/09. As authorised by shareholders at the AGM on 10 July 2007, the Audit Committee determines the level of remuneration for the external auditors on behalf of the Board. Details of this year’s fees are given in note 4 to the financial statements.
Remuneration Committee
The Remuneration Committee comprises four independent non-executive directors: Louise Patten (Chairman), Martha Lane Fox, Steven Holliday, and Sir David Michels. Martha joined the Board and became a member of the Committee on 1 June 2007 to replace Jack Keenan who retired on 10 July 2007. It met five times during the year.
The Remuneration Committee’s primary role is to recommend to the Board the remuneration strategy and framework, giving due regard to the financial and commercial health of the Company and to ensure that executive directors and senior management are fairly rewarded for their individual contributions to the Company’s overall performance.
The remuneration of the non-executive directors is determined by the Chairman and the executive directors. The Remuneration report is set out as required by the Directors’ Remuneration Report Regulations 2002.
Nomination Committee
The Nomination Committee comprises Lord Burns (Chairman), Sir Stuart Rose and all five independent non-executive directors: Jeremy Darroch, Martha Lane Fox, Steven Holliday, Sir David Michels and Louise Patten. Martha joined the Board and became a member of the Committee on 1 June 2007 to replace Jack Keenan who retired on 10 July 2007. From 1 June 2008 Sir David Michels, Deputy Chairman, will chair the Committee to replace Lord Burns who will retire on that date.
The Nomination Committee’s primary role is to ensure that appropriate procedures are in place for the nomination, selection, training and evaluation of directors and for successional plans. It reviews the Company’s Board structure, size, composition and successional needs, thereby keeping under consideration the balance of membership and the required blend of skills, knowledge and experience of the Board. Appointments are made on merit and against objective criteria to ensure that the Board maintains a balance of skills and experience.
It met twice formally during the year and succession planning sessions were held by the Board and the Nomination Committee to consider Board and senior management changes. Under the Company’s Articles of Association, all directors seek election at their first Annual General Meeting following appointment and all directors are required to offer themselves for re-election at least every three years. Under the new Board structure from 1 June 2008 we have announced that Sir Stuart Rose will retire and seek re-election by shareholders on an annual basis, commencing in 2008, rather than on the usual three-year cycle.
On 10 March 2008 we announced the appointment with immediate effect of two new executive directors, Kate Bostock and Steven Esom, as well as changes to the senior management team. The Board was keen to ensure a proper mix of top talent, combining new recruits and existing employees.
Consideration was given when recruiting below Board level as to whether further progression on the Board was possible, as demonstrated by the promotion of two new executive directors and the increased responsibility given to Ian Dyson as Group Finance and Operations Director.
On 22 May 2007 we announced the appointment of a new non-executive director, Martha Lane Fox, with effect from 1 June 2007. This followed a search by an external search consultancy commissioned by the Nomination Committee. The candidates were shortlisted by the Chairman and the Chief Executive and the preferred candidate then seen by a wider group of directors. A search led by Sir David Michels on behalf of the Committee is currently under way for a new non-executive director which is being conducted through an external search consultancy.
Attendance
The following table sets out the number of meetings of the Board and its governance committees during the year and individual attendance by Board and committee members at those meetings. Directors who were unable to attend Board or committee meetings reviewed the relevant papers and provided comments prior to the meeting to the Chairman, or Committee Chairman, as appropriate.
| Group Board |
Audit Committee |
Remuneration Committee |
Nomination Committee |
|||||
|---|---|---|---|---|---|---|---|---|
| Name of Director | A | B | A | B | A | B | A | B |
| Lord Burns, Chairman | 9 | 9 | – | – | – | – | 2 | 2 |
| Sir Stuart Rose, Chief Executive | 9 | 9 | – | – | – | – | 2 | 2 |
| Executive Directors | ||||||||
| Kate Bostock (appointed 10 March 2008) |
1 | 1 | – | – | – | – | – | – |
| Ian Dyson | 9 | 9 | – | – | – | – | – | – |
| Steven Esom (appointed 10 March 2008) |
1 | 1 | – | – | – | – | – | – |
| Steven Sharp | 9 | 9 | – | – | – | – | – | – |
| Non-Executive Directors | ||||||||
| Jeremy Darroch | 9 | 9 | 4 | 4 | – | – | 2 | 2 |
| Martha Lane Fox (appointed 1 June 2007)1 |
7 | 6 | 3 | 2 | 3 | 2 | 1 | – |
| Steven Holliday2 | 9 | 8 | 4 | 3 | 5 | 4 | 2 | 2 |
| Jack Keenan (retired 11 July 2007) |
3 | 3 | 1 | 1 | 2 | 2 | 1 | 1 |
| Sir David Michels3 | 9 | 6 | 4 | 2 | 5 | 3 | 2 | 2 |
| Louise Patten | 9 | 9 | – | – | 5 | 5 | 2 | 2 |
A = Maximum number of meetings the director could have attended.
B = Number of meetings the director actually attended.
1 Martha Lane Fox was unable to attend meetings of the Board on 8 February 2008, the Audit and Remuneration Committees on 27 February 2008 and the Nomination Committee on 29 February 2008 as she was in hospital.
2 Steven Holliday was unable to attend meetings of the Audit and Remuneration Committees on 15 May 2007 and the Board on 5 November 2007 due to overseas commitments with National Grid plc.
3 Sir David Michels was unable to attend meetings of the Board on 9 and 21 May and 5 November 2007; the Audit Committee on 15 May and 31 October 2007; and the Remuneration Committee on 15 and 21 May 2007 due to overseas business commitments already planned prior to his appointment to the M&S Board.
© 2008 Marks and Spencer plc