| The Company is committed to high
standards of corporate governance
in its business and has complied throughout
the period under review with all the
provisions of the Combined Code on
Corporate Governance (‘the Code’).
This statement, together with the
Remuneration Report, explains how
the Company has applied the governance
principles of the Code. |
| |
| The Board
|
| |
| The Board comprises five Executive Directors and six Non-Executive
Directors. Biographical details of the Directors are set out
in the Annual Review
and Summary Financial Statement. Changes to the composition
of the Board during the year and the Board succession plans
can be found in the Board
of Directors section. There is a clear division of responsibilities
between the Chairman, who is part-time, and the Group Chief
Executive. All the Non-Executive Directors are considered to
be independent. They bring wide and varied commercial experience
to Board deliberations. Lord Levene is the senior Non-Executive
Director. |
| |
| The Board meets 10 times a year, including a two day strategy
conference. There is a formal schedule of matters reserved for
its consideration. It is responsible to shareholders for the
strategic development of the Group, the management of assets
in a way that maximises performance and the control of the operation
of the business. The Board approves the Group’s strategic plan
and its annual budget and, throughout the year, reviews the
performance of the operating subsidiaries against their budgets
and targets. |
| |
| The Group Chief Executive has authority
delegated by the Board for implementing
the strategy and for managing the
Group. In doing so, he works with
the Group Executive Committee which
comprises of all of the Executive
Directors and certain other senior
executives of the Group. The Group
Chief Executive also chairs the Boards
of Sainsbury’s Supermarkets Ltd and
Shaw’s Supermarkets Inc. |
| |
| The Company has a programme for
meeting Directors’ training requirements.
Newly appointed Directors who do not
have previous public company experience
at Board level are provided with appropriate
training on their role and responsibilities.
New Non-Executive Directors are offered
an appropriate induction programme.
Subsequent training is available on
an ongoing basis to meet particular
needs. |
| |
| The Board has full and timely access
to all relevant information to enable
it to discharge its duties effectively.
The Chairman is responsible for ensuring
that all Directors are properly briefed
on issues arising at Board meetings. |
| |
| All Directors have access to the
advice and services of the Company
Secretary. There is an agreed procedure
by which members of the Board may
take independent professional advice
at the Company’s expense in the furtherance
of their duties. The Company Secretary
has responsibility for ensuring that
Board procedures are followed. The
appointment and removal of the Company
Secretary is one of the matters reserved
for the Board. |
| |
| Board Committees |
| |
| The Remuneration, Nomination and
Audit Committees have written terms
of reference which define their authorities,
duties and membership. These Committees
are made up exclusively of the Non-Executive
Directors, other than the Group Chief
Executive’s membership of the Nomination
Committee. |
| |
| The Audit Committee meets at least
three times a year. Its responsibilities
include making recommendations on
the Company’s accounting and reporting
policies, reviewing the scope and
results of both internal and external
audits and defining and monitoring
internal financial control. It also
reviews the performance, independence
and objectivity of the auditors. The
Committee receives regular reports
from the Group Internal Audit Department
and the external auditors, and monitors
their effectiveness, and it reviews
the interim and annual financial statements
before they are considered by the
Board. The Board had adopted a revised
policy on the engagement of the external
auditors to supply non-audit services,
the objective of which is to ensure
that the provision of such services
does not impact the external auditors’
independence and objectivity. The
Head of Group Internal Audit has direct
access to the Chairman of the Audit
Committee and the Company’s external
auditors attend Committee meetings.
The Chairman of the Audit Committee
holds separate meetings with the Head
of the Group Internal Audit and the
external auditors, whilst the Committee
meets with the external auditors without
management being present. |
| |
| The Nomination Committee advises
the Board on the appointment of Directors
and meets when necessary. All Directors
are required to seek re-appointment
by shareholders at the first opportunity
after their appointment and must stand
for re-election to the Board every
three years under the Company’s
Articles of Association. |
| |
| The responsibilities of the Remuneration
Committee are set out in the Directors’
Remuneration Report. |
| |
| Internal control |
| |
| The Board has overall responsibility
for the system of internal controls
and for reviewing its effectiveness.
The system of internal controls is
designed to manage rather than eliminate
the risk of failure to achieve the
Group’s business objectives and can
only provide reasonable and not absolute
assurance against material misstatement
or loss. It includes all controls
including financial, operational and
compliance controls and risk management. |
| |
| The processes used to assess the
effectiveness of the internal control
systems include the following: |
- regular operational and financial reviews of performance
against budgets and forecasts by management and the Board;
- regular reviews by management and the Audit Committee
of the scope and results of internal audit work across the
Group. The scope of the work covers all key activities of
the Group and concentrates on higher risk areas;
- reviews of the scope of the work of the external auditors
by the Audit Committee and any significant issues arising;
- reviews by the Audit Committee and the Board of accounting
policies and delegated authority levels; and
- consideration by the Board of the major risks facing the
Group and procedures to manage them. These include health
and safety, legal compliance, quality assurance, insurance,
security and social, ethical and environmental risks.
|
| The Board confirms that there is
an ongoing process for identifying,
evaluating and managing the significant
risks faced by the Group. This process
has been in place throughout the year
under review and up to the date of
approval of the Annual Report and
Financial Statements and accords with
the Turnbull guidance. The effectiveness
of the process is reviewed twice a
year by the Audit Committee which
then reports to the Board. The process
consists of: |
- formal identification by management
at each level of the Group through
a self assessment process of the
key risks to achieving their business
objectives and the controls in
place to manage them. The likelihood
and potential impact of each risk
is evaluated;
- certification by management
that they are responsible for
the risks to their business objectives
and that the internal controls
are such that they provide reasonable
but not absolute assurance that
the risks are appropriately identified,
evaluated and managed;
- reporting and review by the
board of each operating company
of risk management activities
and action taken to address non-compliance
with controls or to improve their
effectiveness; and
- independent assurance by internal
audit as to the existence and
effectiveness of the risk management
activities described by management.
|
| The system of internal control and
risk management is embedded into the
operations of the Group, and the actions
taken to mitigate any weaknesses are
carefully monitored. |
| |
| Going concern |
| |
| The Directors confirm that they
are satisfied that the Company has
sufficient resources to continue in
operation for the foreseeable future.
Accordingly, they continue to adopt
the going concern basis in preparing
the Group financial statements. |
| |
| Investor relations |
| |
| The Company is committed to maintaining
good communications with shareholders.
Institutional investors and buyside
and sellside analysts are invited
to briefings by the Company immediately
after the announcement of the Company’s
interim and full year results. The
content of these briefings is posted
on the Company’s website www.j-sainsbury.co.uk/investors
so as to be available to all shareholders. |
| |
| Shareholders have the opportunity
to meet and question the Board at
the Annual General Meeting, which
will be held on 23 July 2003. There
will be a display of various aspects
of the Group’s activities and a business
presentation by the Group Chief Executive.
The Chairman of the Audit, Remuneration
and Nomination Committees will be
available to answer questions. Proxy
votes will be announced after each
resolution. A detailed explanation
of each item of special business to
be considered at the Annual General
Meeting is included with the Notice
of Meeting which will be sent to shareholders
at least 20 working days before the
meeting. |
| |
| Information on matters of particular
interest to private shareholders is
set out in the Annual
Review and Summary Financial Statement.
In addition, the Company’s website
www.j-sainsbury.co.uk/investors
makes available a wide range of information
to all shareholders. |
