The Board's primary responsibility is to promote the long-term success of the Company and deliver sustainable shareholder value. The Board has ultimate responsibility for the management, direction and performance of the Group, and leads and controls the Group's business. The Board is also responsible for ensuring appropriate resources are in place to achieve its strategy and deliver sustainable performance. Through authorities delegated to its Committees, the Board directs and reviews the Group's operations within an agreed framework of controls, allowing risk to be assessed and managed within agreed parameters. The Board is collectively accountable to the Company's shareholders for the proper conduct and success of the business.
The Board's powers are set out in the Company's Articles of Association, which are available to view on its website, and may be amended by a special resolution of its members. The Board may exercise all powers conferred on it by the Articles, in accordance with the Companies Act 2006 and other applicable legislation.
The Board has established a formal schedule of matters reserved for its approval, and has delegated other specific responsibilities to its principal committees: the Audit, Remuneration and Nomination Committees. These are clearly defined within the written terms of reference of the respective committees. Information on the responsibilities and work of each of the Board's committees is set out on pages 42 to 68.
During the year, as part of its annual review process, the matters reserved for the Board were reviewed, and where necessary amended to reflect best practice. The schedule of matters reserved for the Board includes the consideration and approval of:
- the Group's overall strategy, medium-term plans and annual budgets;
- financial statements and Group dividend policy, including recommendation of the final dividend;
- major acquisitions, disposals and capital expenditure;
- major changes to the capital structure including tax and treasury management;
- major changes to accounting policies or practices;
- the Group's corporate governance and compliance arrangements;
- the system of internal control and risk management policy;
- the Group's risk appetite statements; and
- review of management development strategy.
Composition of the Board
The Board is made up of the non-executive Chairman, four executive directors and six non-executive directors. The current balance of the Board's skills, experience and knowledge, together with regular briefings by executives below Board level, ensures that views, perceptions and discussions are not dominated by any one specific view. The structure, size and composition of the Board is continually reviewed to ensure it remains suitable for the needs of the business.
There is an established, formal, rigorous and transparent procedure for the selection and appointment of new directors to the Board, and this is described in the Nomination Committee Report on page 46. At the Annual General Meeting to be held on 12 June 2014, shareholders will be asked, in accordance with Principle B.7.1 of the Code, to re-appoint all their directors.
To ensure that they continue to be effective and each director remains committed to their role and has sufficient time to manage their commitment to their roles, the Board and its committees conduct a review of their performance each year. In accordance with provision B.6.2. of the Code, the Board commissioned an externally facilitated evaluation during the year under review. The evaluation was conducted by Geoffrey Shepheard of ICSA Board Evaluation ('ICSA'). Mr Shepheard and ICSA are both completely independent and, other than having conducted a similar evaluation in 2010, have no connection with the Company.
The evaluation was carried out in November and December 2013 and Mr Shepheard conducted one-to-one interviews with each member of the Board, the Group Executive Committee and the Company Secretary. Each interview lasted approximately two hours and covered topics agreed in advance of the process with the Chairman and Company Secretary. The topics were as follows:
- Board responsibilities;
- Board meetings;
- Support for the Board;
- Board composition;
- Working together; and
- Outcome and achievements.
As part of the interview process, interviewees were also encouraged to raise any issues which they considered were pertinent to the process, and following each meeting, the interviewee was provided with a short synopsis of the facilitator's understanding of the interview and an opportunity for further comment was provided.
A report on the findings of the evaluation process was prepared by ICSA and presented to the Board at its meeting in January 2014.
The report concluded that the review had been extensive and the Board was assessed as being in the upper quartile of FTSE companies on governance. The report was positive about the overall performance of the Board and recognised continued improvement since the last external review conducted in 2010. No significant issues were highlighted and the evaluation indicated that the Board continued to work efficiently and effectively, that the contribution of each director and their interaction with each other was good and that the non-executive directors offered robust challenge where appropriate.
As a result of the evaluation, a number of actions were agreed and will be implemented in the 2014/15 financial year:
- review of format and timing of strategy days;
- review of annual standing agenda schedule for meetings of the Nomination Committee; and
- continuing improvement of the quality of information and papers submitted to the Board.
As part of the evaluation process, the Group Chief Executive carried out a performance review of the executive directors. The non-executive directors, led by the SID, conducted a performance review of the Chairman in respect of the financial year.
The Board has confirmed that the contribution of each of the directors continues to be effective and that shareholders should be supportive of their re-appointment to the Board.
The Board will continue to review its procedures, effectiveness and development in the year ahead, and the Chairman will use the output of the ICSA evaluation in his individual meetings with directors during the year.
Induction, information and professional development
All new directors appointed to the Board receive an induction pack as part of their comprehensive induction programme tailored to their experience, background and particular areas of focus. The induction programme is designed to develop directors' knowledge and understanding of the Group's operations and culture.
The induction programme includes:
- individual one-to-one meetings with the Chairman, the Group Chief Executive, the Group Finance Director and other directors;
- site visits to the Group's stores and those of its competitors;
- meetings with management of the Group's Operating Companies and other senior management; and
- if required, external training courses at the Group's expense.
In accordance with best practice, the Chairman considers and addresses the development needs of the Board as a whole, if any, and ensures that each director updates their individual skills, knowledge and expertise.
During the year, the Company Secretary arranged for the Group's corporate lawyers to provide an update session on the duties and responsibilities of directors of a UK listed company. Amongst other topics, the training covered Listing Rules compliance and the control and release of inside information, and provided case studies and practical situations for the directors to consider.
Detailed updates have also been provided on the new reporting requirements contained within this year's Annual Report and Accounts, and, in particular, the new remuneration regulations and the fair, balanced and understandable statement directors have been required to make.
Subsequent training in specific aspects of the Group's businesses is provided to directors, when requested, or regularly as part of site visits. Directors are briefed on issues at Board and Committee meetings and have full and timely access to relevant information ahead of each meeting.
The Board also receives regular reports and feedback from discussions with the Company's institutional shareholders and are informed of any issues or concerns raised by them. This process allows directors to develop necessary understanding of the views of these shareholders and also enables the Board to judge whether investors have a sufficient understanding of the Group's objectives. In addition to planned development and briefings, each director is expected to take responsibility for identifying their own individual needs and to take necessary steps to ensure that they are adequately informed about the Group and their responsibilities as a director. The Board is confident that all its members have the requisite knowledge, ability and experience to perform the functions required of the directors of a listed company. There is also an agreed procedure whereby directors may take independent professional advice at the Group's expense in the furtherance of their duties.
Conflicts of interest
Each director has a duty under the Companies Act 2006 to avoid
a situation where he or she may have a direct or indirect interest
that conflicts with the interests of the Company. The Company
has robust procedures in place to identify, authorise and manage
such conflicts of interest, and these procedures have operated
effectively during the year.
A register of directors' situational and transactional conflicts is
maintained by the Company Secretary and reviewed by the
Board on a regular basis and directors have a continuing duty
to update the Board with any changes to their conflicts of
interest. Following review, the Board confirmed that there
were no situations of which they were aware which would, or
potentially could, give rise to conflicts with the interests of the
Company, other than those that might arise from directors'
other appointments, which are set out in the directors'