Tesco 2012 Annual Report Download - page 55

Governance structures
Over the past few months, we have been reviewing and updating the
Group’s corporate governance framework, to ensure that it remains
relevant to the business both today and in future and supports our
management in discharging their responsibilities. Copies of all the
documents referred to below are available in full on the Company’s
website at www.tescoplc.com/plc/ir/corpgov/boardprocess.
The Matters Reserved to the Board and the delineation of responsibilities
between the Chairman and Chief Executive have both been clarified
and updated to reflect best practice, while taking into account the
needs of the business.
We have taken the opportunity to simplify the Board Committees.
There are now four committees:
 Audit;
 Remuneration;
 Nominations; and
 Corporate Responsibility.
The remit of the Audit and Remuneration Committees is substantially
unchanged, although the terms of reference of both of these
Committees have been reviewed in line with best practice to ensure
that they remain relevant to the business.
The remit of the Nominations Committee has been broadened so that
it can deepen its focus on succession planning and the development
of talent and, in addition, consider governance matters, including
overseeing the structure and remit of the Board and its Committees.
The number of meetings is being increased to four a year.
A new Corporate Responsibility Committee has been created to ensure
that the Board maintains an adequate focus on corporate responsibility
in its widest sense. This reflects the importance to the Group of how it
is perceived externally. The new Committee is responsible for defining
and overseeing the Group’s corporate and social obligations.
We have also reviewed the governance framework for Tesco Bank
(which, in line with regulatory requirements, has an independent
Board) to ensure that the importance of robust, independent and
competent challenge at the level of the Bank’s Board is balanced
with appropriate alignment with, and oversight of, the PLC Board.
The structure of the Bank Board and its Committees remains
unchanged and the Bank Board continues to have three Board
Committees: Audit; Risk; and Remuneration. The constitution of the
Bank Board has, however, been revised and will now comprise a
Non-executive Chairman, together with broadly equal representation
of the Bank’s executive management, Tesco PLC Non-executive
Directors and independent Non-executive Directors.
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.
Tesco PLC Annual Report and Financial Statements 2012 51
STRATEGIC REVIEW PERFORMANCE REVIEW GOVERNANCE FINANCIAL STATEMENTSOVERVIEW
General information Directors’ remuneration reportBoard of Directors Principal risks and uncertainties Corporate governance