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38 Corporate governance Audit Committee The current members of the Audit Committee are Andrew Bonfi eld (Chairman), Anders Dahlvig, Michael Hepher and John Nelson. Phil Bentley retired from the Board and therefore the Audit Committee on 17 March 2010 and was replaced as chairman of the Audit Committee by Andrew Bonfi eld on this date. Daniel Bernard resigned as a member of the Committee following his appointment as Chairman of the Board on 3 June 2009. In accordance with the requirements of the Combined Code, Andrew Bonfi eld is designated as the committee member with recent and relevant fi nancial experience. The Audit Committee is comprised of members having the necessary ability and experience to understand fi nancial statements. Under its terms of reference, which are available on the Company’s website, the Audit Committee is required, amongst other things to: – monitor the integrity of the fi nancial statements of the Company; – review, understand and evaluate the Company’s fi nancial, risk, and other internal controls and their associated systems; – monitor and review the effectiveness of the Company’s internal audit function on an annual basis; – oversee the relationship with the external auditors, making recommendations to the Board in relation to the appointment, remuneration and terms of engagement; and – monitor and review the external auditor’s independence, objectivity and effectiveness and to approve the policy on the engagement of the external auditor to supply non-audit services. At each of its meetings, the Audit Committee meets separately with the external auditors and the Group Audit & Risk Management Director without management being present. Further details on the work of the Audit Committee can be found under Auditors and the Audit Committee report on pages 40 and 54 respectively. Nomination Committee The current members of the Nomination Committee are Daniel Bernard (Chairman), Andrew Bonfi eld, Anders Dahlvig, Michael Hepher, Janis Kong and John Nelson. The primary purpose of the Nomination Committee is to lead the process for Board appointments and to make recommendations for maintaining an appropriate balance of skills on the Board. In particular, the Nomination Committee: – reviews the structure, size and composition of the Board and makes recommendations to the Board, as appropriate; – identifi es the balance of skills, knowledge and experience on the Board and nominates candidates to fi ll Board vacancies; – reviews the time required from a non-executive director; – considers succession planning, taking into account the challenges and opportunities facing the Group and the future skills and expertise needed on the Board; and – reviews the leadership needs of the organisation, both executive and non-executive, with a view to ensuring the continued ability of the organisation to compete effectively in the marketplace. Kingfi sher plc Annual Report and Accounts 2009/10 The Nomination Committee meets periodically when required and external advisers may be invited to attend. Following a rigorous search and selection process carried out with the assistance of specialist recruitment consultants, the Nomination Committee considered the proposed appointments of Anders Dahlvig and Andrew Bonfi eld as additional non-executive directors. In making its appointment recommendations to the Board, the committee reviewed the overall balance of skills, knowledge and experience on the Board against current and future requirements of the Company. Remuneration Committee A report detailing the composition, responsibilities and work carried out by the Remuneration Committee during the year, including an explanation of how it applied the principles of the Combined Code in setting executive directors’ remuneration, is included within the directors’ remuneration report on pages 41 to 53. Retail Board The members of the Retail Board are the executive directors, divisional chief executives and certain other Group functional heads. The executive element of the Retail Board, whose biographical details are set out on page 30 meet 12 times a year under the chairmanship of the Group Chief Executive. The remaining members of the Retail Board, whose biographical details are also set out on page 30, participate in at least four meetings per year and other meetings upon invitation. The Retail Board is responsible for the day-to-day management of the Group’s businesses and the overall fi nancial performance of the Group in fulfi lment of strategy, plans and budgets. It is also responsible for making recommendations on: – monthly Group trading performance; – the Group’s capital structure and funding; – capital expenditure proposals, major acquisitions or disposals of businesses; – the Group’s key risks; – management development and senior executive succession plans; – the Group’s corporate responsibility programme; and – the individual progress of operating companies. Company Secretary The Company Secretary acts as Secretary to the Board and its committees and, with the consent of the Board, may delegate responsibility for the administration of the committees to other suitably qualifi ed staff. The Company Secretary is also responsible for ensuring that the correct Board procedures are followed and advises the Board on corporate governance matters. All directors have access to the advice and services of the Company Secretary and his appointment and removal is one of the matters reserved to the Board.
Kingfi sher plc Annual Report and Accounts 2009/10 Accountability, risk management and internal control The Board considers risk assessment, identifi cation of mitigating actions and internal control to be fundamental to achieving the Company’s strategic corporate objectives. This system of internal control is: – the Board’s overall responsibility; – annually reviewed for its effectiveness by both the Board and the Audit Committee; and – in compliance with the Turnbull Guidance 2005. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The Board has approved a set of policies, procedures and frameworks for effective internal control that implement the Turnbull Guidance, ‘Internal Control: Revised Guidance for Directors on the Combined Code’, for the year under review and to the date of approval of this Annual Report. These procedures are subject to regular review and provide an ongoing process for identifying, evaluating and managing the signifi cant risks faced by the Group. The internal audit function: – works with the operating companies to develop, improve and embed risk management tools and processes into their business operations; – oversees the operation of the individual operating businesses’ audit committees; – ensures that business risks are identifi ed, managed and regularly reviewed by management at all levels of the Group and that directors are periodically appraised of the key risks in accordance with the Turnbull Guidance 2005; – provides the Audit Committee and the Board with objective assurance on the control environment across the Group; and – monitors adherence to the Group’s key policies and principles. Management at each operating company has responsibility for the identifi cation and evaluation of the signifi cant risks applicable to their business and any mitigating actions to be taken through the Retail Board, which reviews, identifi es and evaluates the risks that are signifi cant at a Group level as well as the mitigating actions against those risks. These are then considered by the Board. The type of risks identifi ed include strategic risk, external factors (such as competition, environment and regulation), change management programmes, health and safety, retention of key management and macro market risks. 39 Monitoring and review activities There are clear processes for monitoring the system of internal control and reporting any signifi cant control failings or weaknesses together with details of corrective action. These include: – a formal quarterly confi rmation provided by the fi nance director of each operating company certifying the operation of their control systems and highlighting any weaknesses, the results of which are reviewed by regional management, the Audit Committee and the Board; and – periodic examination of business processes on a risk basis including reports on controls throughout the Group undertaken by the internal audit function which reports directly to the Audit Committee. Any controls and procedures, no matter how well-designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. Management is required to apply judgement in evaluating the risks facing the Group in achieving its objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of the risks concerned materialising, in identifying the Company’s ability to reduce the incidence and impact on the business of risks that do materialise and in ensuring the costs of operating particular controls are proportionate to the benefi t. The Board confi rms that it has reviewed the effectiveness of the internal control system, including fi nancial, operational and compliance controls and risk management in accordance with the Combined Code for the period from 1 February 2009 to the date of approval of this Annual Report. Following this review, the Board is satisfi ed that the system of internal control is effective.
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