26 <strong>Compass</strong> <strong>Group</strong> PLC Annual Report 2007Directors’ ReportReport of the directorscontinuedThe limited power granted to the directorsat last year’s Annual General Meeting to allotequity shares for cash other than pro ratato existing shareholders expires no later than15 May 2008. Subject to the terms of thesection 80 authority, your directorsrecommend that this authority should berenewed. Resolution 12 set out in the Noticeof Meeting will be proposed as a SpecialResolution to give your directors the ability(until the Annual General Meeting to be heldin 2009) to issue ordinary shares for cash,other than pro rata to existing shareholders,in connection with a rights issue or up to alimit of 5% of the ordinary share capitalissued at the date of this report. In addition,and in line with best practice, the Companyhas not issued more than 7.5% of its issuedshare capital on a non pro-rated basis overthe last three years. Your directors have nopresent intention to issue ordinary shares,other than pursuant to the Company’semployee share schemes. The directorsrecommend that shareholders vote in favourof Resolutions 11 and 12 to maintain theCompany’s flexibility in relation to futureshare issues, including any issues to financebusiness opportunities should appropriatecircumstances arise.Details of cancellations of existing shares andissues of new shares are set out in note 24 tothe accounts on page 74, which also containsdetails of options granted over unissuedcapital.Major shareholdingsThe following major shareholdings have beennotified to the Company.% of issued capitalFranklin Resources, Inc. and its affiliates 9.32Legal & General <strong>Group</strong> Plc 6.00Harris Associates L.P. 3.01DirectorsBrief particulars of the directors in office atthe date of this Report are listed on page 17and further details of the Board compositionare disclosed in the Corporate governancereport. Sir James Crosby and Tim Parkerwere appointed to the Board as non-executivedirectors on 17 February 2007 and SusanMurray was appointed to the Board as a nonexecutivedirector on 11 October 2007. Eachof them will stand for election at the AnnualGeneral Meeting. The directors standing forre-election at the Annual General Meetingare Sir Roy Gardner and Steve Lucas. Eachdirector, being eligible, offers himself forelection or re-election and each, followinga performance evaluation during the year(save for Susan Murray), continues to beeffective and demonstrates commitment tohis respective role. It is the view of the Boardthat each of the non-executive directors bringconsiderable management experience andindependent perspective to the Board’sdiscussions and they are considered to beindependent of management and free fromany relationship or circumstance that couldaffect, or appear to affect, the exercise of theirindependent judgement.Directors’ interests in sharesThe directors who have held office duringthe year ended 30 September 2007 had thefollowing interests in the ordinary shares ofthe Company.30 September 2007 1 October 2006(or date of retirement) (or on appointment)Peter Blac<strong>kb</strong>urn 1 5,000 5,000Peter Cawdron 2 24,200 24,200Richard Cousins 200,000 100,000Sir James Crosby 34,000 –Sir Roy Gardner 175,000 100,000Val Gooding 2 5,502 5,502Gary Green 624,270 624,270Sven Kado 33,000 12,500Steve Lucas 1,000 –Andrew Martin 158,559 110,027Tim Parker 20,219 –Sir Ian Robinson 6,289 1,2891. Peter Blac<strong>kb</strong>urn retired as a director on 31 October 2007.2. Val Gooding and Peter Cawdron retired as directors on31 December 2006 and 16 February 2007 respectively.There were no changes to the shareholdingsof those directors in office at the date ofthis Report between 1 October 2007 and28 November 2007.
27 <strong>Compass</strong> <strong>Group</strong> PLC Annual Report 2007Directors’ ReportCorporate governanceincluding the report of the Audit CommitteeCompliance with the Combined CodeThe Board is committed to the higheststandards of corporate governance set out inthe Combined Code on corporate governancepublished by the Financial Reporting Councilin June 2006 (the ‘Code’). The Board isaccountable to the Company’s shareholdersfor good governance and this report describeshow the Board applied the principles of goodgovernance set out in the Code during theyear under review.The BoardAs at 30 September 2007 and at the date ofthis report, the Board of directors was madeup of 10 members comprising the Chairman,three executive directors and six non-executivedirectors. On 11 October 2007 Susan Murraywas appointed as a non-executive directorand Peter Blac<strong>kb</strong>urn retired from the Boardon 31 October 2007. The non-executivedirectors are considered by the Board to beindependent of management and free of anyrelationship which could materially interferewith the exercise of their independentjudgement. The Board considers that eachof the non-executive directors brings his ownsenior level of experience, gained in his ownfield mainly in international operations.Biographical details of the directors currentlyin office are shown on page 17. TheCompany’s policy relating to the terms ofappointment and the remuneration of bothexecutive and non-executive directors isdetailed in the directors’ remuneration reporton pages 33 to 39.The Board meets regularly during the yearas well as on an ad hoc basis, as required bybusiness need. The Board manages thebusiness of the Company and may, subjectto the Articles of Association and applicablelegislation, borrow money, guarantee,indemnify, mortgage or charge the business,property, assets (present and future) and issuedebentures and other securities and givesecurity, whether outright or as a collateralsecurity, for any debt, liability or obligationof the Company or of any third party. TheBoard has a formal schedule of mattersreserved for its decision, although itsprimary role is to provide entrepreneurialleadership and to review the overall strategicdevelopment of the <strong>Group</strong> as a whole. Inaddition the Board sets the <strong>Group</strong>’s valuesand standards and ensures that it acts ethicallyand that its obligations to its shareholders areunderstood and met. The Board may delegateany of its powers to any committee consistingof one or more directors. The Company hasdelegated day-to-day operational decisions tothe Executive Committee referred to on page29. The Board met nine times during the yearand director attendance for each meeting isshown in the table on page 29. The Boardhas established a procedure for directors,if deemed necessary, to take independentprofessional advice at the Company’s expensein the furtherance of their duties. This is inaddition to the access that every director hasto the General Counsel and CompanySecretary, who is charged with ensuring thatBoard procedures are followed and that goodcorporate governance and compliance isimplemented within the <strong>Group</strong>. Togetherwith the <strong>Group</strong> Chief Executive and theGeneral Counsel and Company Secretary,the Chairman ensures that the Board is keptproperly informed and is consulted on allissues reserved to it. Board papers and otherinformation are distributed at times to allowdirectors to be properly briefed in advance ofmeetings. In accordance with the Company’sArticles of Association, directors have beengranted an indemnity issued by the Companyto the extent permitted by law in respect ofliabilities incurred as a result of their office.The indemnity would not provide anycoverage to the extent that a director is provedto have acted fraudulently or dishonestly.The Company has also arranged appropriateinsurance cover in respect of legal actionagainst its directors and officers. The rolesof Chairman and <strong>Group</strong> Chief Executive areseparate and clearly defined with the divisionof responsibilities set out in writing andagreed by the Board.The Chairman has addressed thedevelopmental needs of the Board as a whole,with a view to developing its effectivenessas a team and assists in the development ofindividual skills, knowledge and expertise.During the year, the Board took forwardthe results of previous evaluation processesto assess its performance and that of itscommittees and to identify areas in which itseffectiveness, policies and processes might beenhanced, which utilised both a questionnaireand discussions with all Board members.Performance evaluations, including the skillsbrought to the Board and the contributionseach director made to it, were carried outfor each director. Executive directors’performance has been assessed by theChairman and the <strong>Group</strong> Chief Executive.The <strong>Group</strong> Chief Executive’s performancewas evaluated by the Chairman and the nonexecutivedirectors. The senior independentnon-executive director led the review of theChairman’s performance in consultation withthe executive and non-executive directors.The non-executive directors’ performancewas considered by the Chairman and by the<strong>Group</strong> Chief Executive, as well as by theBoard as a whole, which reviewed the resultsof the questionnaires referred to above.Meetings between the non-executivedirectors, both with and without the presenceof the <strong>Group</strong> Chief Executive, are scheduledin the Board’s annual programme. TheBoard has also arranged to hold at least twoBoard meetings each year at <strong>Group</strong> businesslocations to help all Board members gaina deeper understanding of the business.This also provides senior managers fromacross the <strong>Group</strong> the opportunity to presentto the Board as well as to meet the directorson more informal occasions.As part of their ongoing development, theexecutive directors are encouraged to seekan external non-executive role on a noncompetitorboard, for which they may retainthe remuneration in respect of theappointment. In order to avoid any conflictof interest, all appointments are subject to theBoard’s approval and the Board monitors theextent of directors’ other interests to ensurethat the effectiveness of the Board is notcompromised. Succession planning is a matterfor the whole Board rather than for acommittee. The Company’s Articles ofAssociation provide that one-third of thedirectors retire by rotation each year andthat each director will seek re-election at theAnnual General Meeting every three years.Additionally, new directors may be appointedby the Board but are subject to election byshareholders at the first opportunity aftertheir appointment. The Articles ofAssociation limit the number of directors tonot less than two and not more than 20 savewhere shareholders decide otherwise. It isBoard policy that non-executive directorsare appointed normally for an initial termof three years which is then reviewed andextended for a further three-year period. It isalso Board policy that non-executive directorsshould not generally serve on the Board formore than nine years. Following theirappointment, formal comprehensive andtailored induction is offered to all nonexecutivedirectors, supplemented by visits tokey locations within the <strong>Group</strong> and meetingswith members of the Executive Committeeand other key senior executives. With theexception of Susan Murray, all of the directorsbeing proposed for election or re-election atthe Annual General Meeting have beensubject to a performance evaluation duringthe year ended 30 September 2007 and theBoard is content that each has continued tobe effective and has demonstrated hiscommitment to his respective role.Although the non-executive directors are notasked to meet the shareholders of the Company,their attendance at presentations of theannual and interim results is encouraged. TheChairman ensures that the Board maintainsan appropriate dialogue with shareholders.Sir James Crosby is the Company’s seniorindependent non-executive director.The formal terms of reference for the mainBoard committees, approved by the Boardand complying with the Code to assist in thedischarge of its duties, are available from theGeneral Counsel and Company Secretaryand can also be found on the Company’swebsite at www.compass-group.com.Membership of the various committees isshown on page 29. The General Counseland Company Secretary acts as secretaryto all Board committees.
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