Corporate governance report

Combined Code

The Board has prepared this report with reference to the UK Combined Code of Corporate Governance issued by the Financial Reporting Council as revised in June 2006.

Throughout 2008/09 the Group has complied with the provisions set out in Section 1 of the Combined Code and applied its principles, except in the following areas:

Combined Code provisions Status Explanation
A.3.2 – at least half the Board, excluding the Chairman, comprise independent Non-Executive Directors. At the begining of the year there was one more Executive Director than Non-Executive Directors. With the retirements of Sir Ken Morrison and Roger Owen in the past year plus the recruitment of Philip Cox as a Non-Executive Director in April 2009, the Board will comprise of a majority of independent Non-Executive Directors.
C.3.1 – at least one member of the Audit Committee has recent relevant financial experience. During the year the Audit Committee did not have a member with recent relevant financial experience. It is intended that Philip Cox will, after a period of induction, chair the Audit Committee. He has recent and relevant financial experience.
C.3.4 – there are arrangements in place for the staff to raise concerns in confidence. Comprehensive whistle-blowing procedures did not exist throughout the period. Whistle-blowing procedures were enhanced after the start of the year in February 2008.

The Board

a) Membership

On 1 February 2009, the Board comprised of a Non-Executive Chairman, four Executive Directors and four Non-Executive Directors. On 13 March 2008, Sir Ken Morrison retired as Chairman and Director of the Company. Sir Ian Gibson, previously Deputy Chairman was appointed Non-Executive Chairman on this date.

There is a clear division of responsibilities between the Non- Executive Chairman and the Chief Executive (CEO), which has been set out in writing and agreed by the Board.

On 1 February 2009, Roger Owen retired as a Director and on 1 April 2009, Philip Cox will join the Group as a Non-Executive Director. With these changes, the majority of the Board will consist of Non-Executive independent Directors. Details of appointments, roles and backgrounds of the Directors can be found in the Board of Directors.

b) Performance evaluation

The performance of the Board, its committees and its Directors is assessed and appraised throughout the year. The Chairman is responsible for the monitoring of the performance of the Executive Directors. In January 2009, the Chairman conducted an evaluation, without external assistance, of the performance of the Board and the results were shared with the other Directors. The Board was satisfied with its performance and it agreed to act on those areas for which it believed improved processes could be implemented.

c) Senior Independent Director

Paul Manduca, the Senior Independent Director (SID) is available to shareholders as an alternative to the Chairman, CEO and the Group Finance Director. The SID ensures that he is available to meet shareholders during the year and reports any relevant findings to the Board or Chairman.

d) Non-Executive Directors

The Non-Executive Directors provide a varied range of skills and experience to the Group. The Board is satisfied that all Non- Executive Directors, including the Non-Executive Chairman remain independent according to the definition contained in the Combined Code. No Non-Executive Director:

  • has previously been employed by the Group within the last five years;
  • has had a material business relationship with the Group within the last three years;
  • receives remuneration other than Director’s fees;
  • has close family ties with any of the Group’s advisors, Directors or senior employees;
  • holds cross-directorships or has significant links with other Directors through involvement in other companies or bodies;
  • represents a significant shareholder; or
  • has served on the Board for more than nine years.

All Non-Executive Directors are provided with a comprehensive, formal and tailored induction to the business. The minimum time commitment expected of the Non-Executive Directors is one day per month attendance at meetings, together with attendance at the Annual General Meeting, Board away days and site visits, plus adequate preparation time. The Board is satisfied that each of the Non-Executive Directors commits sufficient time to the business of the Group and contributes to the governance and operations of the Group.

e) Board responsibilities

The Board is responsible for setting and approving the strategy and key policies of the Group, and for monitoring the progress towards achieving these objectives. It monitors financial performance, critical operational issues and risks. The Board also approves all circulars, listing particulars, resolutions and correspondence to the shareholders including the Annual report, half yearly financial report and interim management statements. The formal schedule of matters reserved for the Board remains unaltered and further details are available in Investor information.

Operating boards

The Board delegates the operational responsibility to the following three main bodies, with the CEO and the Group Finance Director being members of each:

a) Executive Board

The Executive Board comprises four Executive Directors who oversee the day-to-day direction of the retail business. The Executive Board meets frequently through the year. Examples of the matters brought to the Executive Board include store and product performance, brand management, food safety, marketing initiatives and the Group’s corporate social responsibilities.

b) Property Board

The Property Board consists of three Executive Directors and meets monthly. This Board has oversight of the strategic development and operational management of the Group’s property. Matters brought to this Board include development of new stores and facilities, refurbishments and extensions.

c) Manufacturing & Distribution Board

The Manufacturing & Distribution Board comprises two Executive Directors, the Manufacturing Director and the Distribution Director plus one other senior executive. This body meets monthly and considers the strategic development of the Group’s manufacturing and distribution functions.

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