Responsibilities and governance:
Corporate governance
Combined Code
The Board of GUS is responsible for the Group’s system of corporate governance. The Board is committed to good governance and to maintaining the highest standards of integrity in all the Group’s activities. This statement describes how the Company has applied the main and supporting principles set out in Section 1 of the Combined Code on Corporate Governance published by the Financial Reporting Council (the ‘Code’). GUS complied throughout the year under review with the Code’s provisions except for certain formal requirements in relation to the terms of reference of the Audit Committee which is explained later in this statement.
The Board
At the date of this report, the Board consists of a Chairman, a Group Chief Executive and eight other directors (three executive directors and five non-executive directors). The names and biographical details of the directors are shown on pages 28 and 29 of this report. In January 2006, Lady Patten retired from the Board.
The five non-executive directors are all determined by the Board to be independent in character and judgment and there are no relationships or circumstances which could affect, or appear to affect, a non-executive director’s judgment. They are appointed for three-year renewable terms. Sir Alan Rudge is the senior independent director.
The Chairman and the non-executive directors meet, at least annually, as a group without the executive directors present. At the conclusion of such meetings, the Chairman withdraws so that, under the leadership of the senior independent director, the nonexecutive directors have the opportunity to discuss any appropriate issues and, at least annually, appraise the Chairman’s performance, taking account of any views expressed by the executive directors.
The Chairman was appointed chairman of Lloyds TSB Group plc in May 2006 and has a number of pro bono appointments (see page 28). He retired as chairman and as a director of Trinity Mirror plc in May 2006. Prior to accepting appointment to the board of Lloyds TSB Group plc and nomination as chairman, the Chairman discussed the proposed appointment with the Nomination Committee. The Nomination Committee (chaired by the senior independent director) and the Board also discussed the proposed appointment without the Chairman being present and were satisfied that he would continue to be able to devote sufficient time to fulfil his role as Chairman of GUS and be available as needed to carry out his responsibilities to GUS.
The Board has six scheduled meetings each year and meets more frequently as required. It met on ten occasions during the year under review. One of these meetings took place at Experian in Nottingham and one meeting at the head office of Argos Retail Group (ARG) in Milton Keynes. The business conducted at the additional unscheduled meetings included finalisation of the terms of the Burberry demerger and GUS share consolidation and the formal approval of an acquisition by Experian and a divestment by ARG. It is inevitable that there will be occasions when circumstances arise to prevent directors from attending meetings. In such circumstances, the usual practice is for the absent director to review the Board papers and convey any views on specific issues to the Chairman. The time commitment expected of non-executive directors is not restricted to Board and Committee meetings. They are available for consultation on specific issues falling within their particular fields of expertise and additional time is spent visiting the Group’s businesses and meeting informally with the Chairman and executive directors.
There is a formal schedule of matters specifically reserved to the Board for decision. The Board establishes overall Group strategy, approves the Group’s operating budget and monitors performance through the receipt of monthly reports and management accounts.
The approval of acquisitions and divestments, for the most part, is a matter reserved for the Board save that it delegates to the Group Chief Executive the responsibility for such activities to a specified level of authority. There are authority levels covering capital expenditure which can be exercised by the Group Chief Executive or by the Chairman and Group Chief Executive jointly. Beyond these levels of authority, projects are referred to the Board for approval. Other matters reserved for the Board include:
- Approval of interim and annual financial
statements.
- Approval of the Group’s budget.
- Treasury policies.
- Internal controls and risk management.
- Succession planning.
- Corporate responsibility.
The division of responsibilities between the Chairman and the Group Chief Executive is clearly established, set out in writing and agreed by the Board. The Group Chief Executive is responsible for day to day management with the chief executives of ARG and Experian being responsible for the performance of each of these businesses respectively. The Chairman and the Company Secretary work closely together in planning a forward programme of Board meetings and establishing their agendas. For scheduled Board meetings, the agenda usually comprises reports from the Group Chief Executive, supported by reports from the chief executive of each of ARG and Experian and the Group Finance Director. The January meeting focuses on strategy, the March/April meeting deals with the approval of operating budgets for the coming financial year, while the May and November meetings cover the approval of preliminary and interim financial statements respectively. Members of senior management below Board level are often invited to make presentations to the Board and participate in certain aspects of the strategy review.
The Chairman ensures that the Board is supplied in a timely manner with information in a form and of a quality to enable it to discharge its duties. The practice is to have the agenda and supporting papers in directors’ hands four clear days ahead of each meeting. Additional information is also provided to directors including monthly management accounts irrespective of whether or not a Board meeting is scheduled for that month. Arrangements are made for non-executive directors to visit the Group’s businesses to see their operations at first hand and have the opportunity to discuss them with local management.
There is in place a procedure under which the directors, in furtherance of their duties, are able to take independent professional advice, if necessary, at the Company’s expense. The Company Secretary is responsible for ensuring that Board procedures are followed and all directors have access to his advice and services.
All directors receive induction on joining the Board. A customised induction process is conducted for new directors taking into account their particular experience and background. This includes information on the Group and its activities, meetings with senior management and site visits. Additional training and updates on particular issues are arranged for directors as appropriate. During the year under review, briefings were provided on the new UK Listing, Disclosure and Prospectus Rules, changes in UK pensions legislation and UK Company Law reform legislation. The Company Secretary is responsible for advising the Board on all corporate governance matters, a responsibility he discharges in part through his membership of the Corporate Governance Committee.
A formal evaluation of the performance of the Board and its committees was conducted during the year under review. This process was carried out with the advice and assistance of an independent consultant using a questionnaire. The questionnaire was designed to enable directors to comment on the functioning of the Board and board processes, to assess strengths and weaknesses and to draw out views that may be helpful not only for the performance of the GUS Board but also its successors following the proposed demerger. The findings were discussed by the Board and used to consider opportunities for improvement. In addition, the Audit and Remuneration Committees conducted internal reviews of their effectiveness using a questionnaire. The responses to the questionnaires were reviewed and discussed by each Committee and, where areas for improvement were identified, actions have been agreed. Individual appraisals of directors have been undertaken by the Chairman. In the case of the Chairman, the appraisal was carried out by the senior independent director.
All directors are subject to re-election by shareholders at the first opportunity after their appointment and, thereafter, in accordance with the Company’s Articles of Association. This ensures compliance with the Code by providing that all directors are required to submit themselves for re-election at least once every three years. Sir Alan Rudge and Oliver Stocken retire by rotation this year. As indicated earlier, the non-executive directors are appointed for specified terms. Mr Stocken was appointed to the Board on 1 April 2000 and, accordingly, he has now completed two full three year terms of office. Following the performance evaluation and individual appraisal referred to earlier, the Chairman and the Board believe that Sir Alan Rudge and Oliver Stocken should be re-elected and confirm that the performance of each continues to be effective and to demonstrate commitment to the role.
The letters of appointment for non-executive directors, including the Chairman, are available for inspection by any person at the Company’s registered office during normal business hours and at the Annual General Meeting (for 15 minutes prior to the meeting and during the meeting).
Board Committees
The Board has appointed a number of committees including the following principal committees: Nomination Committee, Remuneration Committee, Audit Committee and Corporate Governance Committee. In January 2006, Oliver Stocken was appointed Chairman of the Remuneration Committee in succession to Lady Patten and John Coombe was appointed Chairman of the Audit Committee in succession to Oliver Stocken. In order to ensure that undue reliance is not placed on particular individuals, all independent non-executive directors serve on the Audit, Remuneration and Nomination Committees.
The attendance of directors at meetings of the Board and the principal Board Committees was as follows:
| Board member |
Board meetings |
Audit Committee |
Remuneration Committee |
Nomination Committee |
Corporate Governance Committee |
| Number of meetings during year | 10 | 5 | 8 | 2 | 2 |
| Sir Victor Blank (note 1) | 10 | – | – | 2 | 2 |
| Mr John Peace (note 1) | 10 | – | – | 2 | 2 |
| Mr John Coombe | 10 | 5 | 8 | 2 | – |
| Mr Terry Duddy | 9 | – | – | – | – |
| Mr Andy Hornby | 9 | 5 | 8 | 2 | – |
| Mr Frank Newman | 9 | 3 | 4 | 1 | – |
| Mr Don Robert | 8 | – | – | – | – |
| Sir Alan Rudge | 9 | 4 | 6 | 2 | 2 |
| Mr Oliver Stocken | 9 | 5 | 8 | 2 | – |
| Mr David Tyler (note 1) | 10 | – | – | – | – |
| Former director who served during the year | |||||
| Lady Patten (Note 2) | 5 | 4 | 6 | 1 | – |
Notes
- Sir Victor Blank attended four out of five Audit Committee meetings and all Remuneration Committee meetings. John Peace attended all meetings of the Audit Committee and Remuneration Committee. David Tyler attended all meetings of the Audit Committee.
- Lady Patten retired from the Board on 31 January 2006.
Nomination Committee
The Board has established a Nomination Committee which leads the process for Board appointments and makes recommendations to the Board. The members of the Nomination Committee are Sir Victor Blank (Chairman), the five non-executive directors and John Peace (Group Chief Executive). Membership of the Committee remained constant throughout the year under review save for the retirement of Lady Patten in January 2006. The Committee is chaired by the senior independent director on any matter concerning the chairmanship of the Company. The Company Secretary is the Secretary to the Committee.
The Nomination Committee has written terms of reference covering the authority delegated to it by the Board. These include the following duties: to review regularly the composition (including the skills, knowledge and experience required) of the Board and make recommendations to the Board with regard to any changes; to give full consideration to succession planning for directors and other senior executives; and to identify and nominate, for the approval of the Board, candidates to fill Board vacancies as and when they arise. The Nomination Committee’s terms of reference are available on request and can be viewed on the Company’s website at www.gusplc.com.
During the period under review the Nomination Committee had responsibility for nominating candidates for appointments to the boards of each of ARG and Experian after the proposed separation including candidates for the positions of Chairman, Chief Executive and Finance Director of each company. These nominations were subsequently approved by the GUS Board and announced on 28 March 2006.
Before nominating Oliver Stocken and John Peace as candidates for appointment as Chairman of ARG and Experian respectively, the Committee evaluated the balance of skills, knowledge and experience required for the roles. The Committee gave particular weight to the need, so far as practicable, to ensure stability and continuity for each of the businesses during the period of transition and the importance of ensuring that the successful candidates complemented the skills and experience of the respective Chief Executives. In the light of these considerations and the quality of internal candidates, these positions were not openly advertised and external search consultants were not instructed.
In the case of ARG, Oliver Stocken offered exceptional skills, knowledge and experience at Board level of a range of FTSE 100 companies and industries. This is complemented by his expertise as a former Chairman of the GUS Audit Committee and current Chairman of the GUS Remuneration Committee. The Committee was satisfied that Mr Stocken’s other board appointments and commitments would not place constraints on his ability to fulfil properly the role of Chairman of ARG.
In the case of Experian, the Committee considered that John Peace, with his unrivalled experience of the growth of Experian’s businesses and markets, was an outstanding candidate. There was the need for the Chairman to have the capacity to address strategically the significant development potential of Experian and the ability to develop the new company’s corporate character and its values during a period of transition. The Chairman also needed to have a close working relationship with Experian’s Chief Executive and its experienced global management team. The appointment of Mr Peace does not meet fully the independence criteria set out in the Code but the Committee was strongly of the opinion that his appointment was in the best interests of the new company and its shareholders. The Committee also recognised the importance of a strong and experienced senior independent director. The Committee considered that Sir Alan Rudge has the necessary skills and experience to complement John Peace and Don Robert in their roles of Chairman and Chief Executive.
The nominations of Terry Duddy as Chief Executive of ARG and Don Robert as Chief Executive of Experian were made unanimously by the Committee following the recommendation of the GUS Chairman and Group Chief Executive. Mr Duddy and Mr Robert currently serve on the Board of GUS, have extensive knowledge and experience of their respective businesses and have demonstrated their exceptional skills and leadership in their current roles. In the case of the nominations of Richard Ashton as Finance Director of ARG and Paul Brooks as Finance Director of Experian, recommendations were made to the Committee by the GUS Chairman and Group Chief Executive. Mr Ashton joined ARG as Finance Director in October 2001. Mr Brooks joined Experian in April 1999 and, since 2001, has been Experian’s Global Chief Financial Officer.
In nominating John Coombe and Andy Hornby for appointment to the Board of ARG and Sir Alan Rudge and David Tyler to the Board of Experian, all as non-executive directors, the Committee considered that these individuals offered significant knowledge and experience and an important element of continuity to ARG and Experian respectively that would be invaluable during the period of transition. The Nomination Committee was particularly pleased that David Tyler indicated his willingness to be considered for appointment as a non-executive director of Experian. In his current role over the last nine years he has exercised strong independent oversight over a range of diverse businesses and demonstrated outstanding financial skills and independence of mind in contributing to the Board.
Remuneration Committee
The Remuneration Committee comprises the five independent nonexecutive directors: Oliver Stocken (Chairman), John Coombe, Andy Hornby, Frank Newman and Sir Alan Rudge. The Chairman and Group Chief Executive are invited to attend Committee meetings and each attended all Committee meetings in the year under review. Lady Patten was also a member of the Committee until her retirement from the Board on 31 January 2006. The application of corporate governance principles in relation to directors’ remuneration is described in the report on directors’ remuneration and related matters on pages 40 to 51.
Audit Committee
The Audit Committee comprises five non-executive directors: John Coombe (Chairman), Andy Hornby, Frank Newman, Sir Alan Rudge and Oliver Stocken. Lady Patten was also a member of the Committee until her retirement from the Board on 31 January 2006. The Committee has at least two members possessing what the Code describes as recent and relevant financial experience. John Coombe, a chartered accountant, was chief financial officer of GlaxoSmithKline plc prior to joining the Board and the Audit Committee. Oliver Stocken, a chartered accountant, was group finance director of Barclays PLC between 1993 and 1999 and was Chairman of the Audit Committee from July 2000 until December 2005. The other members of the Committee offer a wide range of experience from positions at the highest level both in the UK and the US (the directors’ biographical details appear on pages 28 and 29).The Chairman, Group Chief Executive and Group Finance Director are normally expected to attend Committee meetings and each attended all meetings in the year under review except for one meeting in the case of the Chairman.
The main role and responsibilities of the Committee are set out in written terms of reference which are reviewed annually. They are available on request and can be viewed at the Company’s website at www.gusplc.com. As reported last year, during 2005 the Committee’s terms of reference were amended to formally reflect that in reporting to the Board, the Committee identifies any matters in respect of which it considers that action or improvement is needed and makes recommendations as to the steps to be taken; and in monitoring and reviewing the effectiveness of the audit process, the Committee takes into consideration relevant UK professional and regulatory requirements.
The Committee’s principal oversight responsibilities cover internal control and risk management, internal audit, external audit (including auditor independence) and financial reporting.
The Committee normally meets at least four times a year and met five times during the year under review (including a risk management presentation during a Board visit to Experian in Nottingham). The external auditors, the Group Head of Risk Assurance and the Heads of Internal Audit of ARG and Experian generally attend Audit Committee meetings. In addition, the Committee meets the external auditors without management present.
The Audit Committee has a structured programme linked to the Group’s financial calendar. During the year under review, the Committee undertook the following activities:
- Reviewed the Preliminary Announcement/Annual
Report and Financial Statements and the Interim Announcement and
considered reports from the external auditors identifying any
accounting or judgmental issues requiring its attention;
- Reviewed the statement in the Annual Report
on the system of internal control;
- Reviewed and approved audit plans for the
external and internal auditors;
- Considered quarterly reports from the Group
Head of Risk Assurance and Heads of Internal Audit of ARG and
Experian on the results of internal audit reviews, significant
findings, management audit plans and timeliness of resolution;
- Reviewed reports on the Group’s risk management
process and risk profile; .
- Reviewed, at each scheduled meeting, a report
on any material litigation involving Group companies;
- Reviewed presentations on risk and its identification,
management and control in ARG and Experian with senior management
from these businesses;
- Reviewed arrangements by which Group employees may, in confidence, raise concerns about possible improprieties in financial reporting or other matters.
One of the primary responsibilities of the Audit Committee is to make recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditors. A number of factors were taken into account by the Committee in assessing whether to recommend the external auditors for re-appointment. These included:
- The quality of reports provided to the Audit
Committee and the Board and the quality of advice given;
- The level of understanding demonstrated of
the Group’s businesses and its sectors;
- The objectivity of the external auditors’ views on the controls around the Group and their ability to co-ordinate a global audit working to tight deadlines.
During the year under review, the Committee assessed the effectiveness of the external audit process covering all aspects of the audit service provided by the Company’s external auditors. The Committee also reviewed a report on the external auditors’ own quality control procedures.
The Committee recognises that auditor independence is an essential part of the audit framework and the assurance it provides. Non-audit fees paid to the Company’s auditors, PricewaterhouseCoopers LLP, in respect of the year under review exceeded the audit fee and included fees relating to acquisitions, the Burberry demerger and GUS share consolidation and preparatory work in connection with the proposed demerger of ARG and Experian. The Committee has established control processes to safeguard the objectivity and independence of the external auditors and to ensure that the independence of the audit work undertaken by the external auditors is not compromised.
The Committee has established a policy covering the type of nonaudit work that can be assigned to the external auditors. The auditors may only provide such services provided that such advice does not conflict with their statutory responsibilities and ethical guidance. These services are:
- Further assurance services - where the external
auditors’ deep knowledge of the Group’s affairs means that they
may be best placed to carry out such work. This may include, but
is not restricted to, shareholder and other circulars, regulatory
reports and work in connection with acquisitions and divestments.
- Taxation services - where the external auditors’
knowledge of the Group’s affairs may provide significant advantages
which other parties would not have. Where this is not the case,
the work is put out to tender.
- General - in other circumstances, the external auditors may provide services, provided that proposed assignments are put out to tender and decisions to award work are taken on the basis of demonstrable competence and cost effectiveness. However, certain areas of work are specifically prohibited including work related to accounting records and financial statements that will ultimately be subject to external audit and management of, or significant involvement in, internal audit services.
The Audit Committee Chairman’s pre-approval is required before the Company uses non-audit services that exceed financial limits set out in the policy.
The Committee receives half-yearly reports providing details of assignments and related fees carried out by the external auditors in addition to their normal work. Fees in respect of such assignments carried out in the year under review were:
| £m | |
| – Further assurance services | 4 |
| – Taxation services | 3 |
Corporate Governance Committee
To assist in its monitoring of corporate governance issues, the Board has established a Corporate Governance Committee with written terms of reference covering the authority delegated by the Board. These include keeping under review all legislative, regulatory and corporate governance developments that might affect the Company’s operations and making recommendations to the Board in relation to them. The members of the Corporate Governance Committee are Sir Victor Blank, John Peace, Sir Alan Rudge and Gordon Bentley, the Company Secretary. The Committee met on two occasions during the year under review.
Accountability and Audit
The Board acknowledges that it is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide reasonable, but not absolute, assurance against material misstatement or loss. The Board reviews annually the effectiveness of the key procedures which have been established to provide internal control and has done so in respect of the year under review.
The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group including those risks relating to social, environmental and ethical matters. This process was in place throughout the year under review and up to the date of approval of the Annual Report and meets the requirements of the guidance entitled “Internal Control: Guidance for Directors on the Combined Code” issued by the Institute of Chartered Accountants in England and Wales in 1999. The Audit Committee has kept under review the effectiveness of this system of internal control and has reported regularly to the Board.
The key procedures, which operated throughout the year, were as follows:
Risk assessment:
- The Group set out its objectives clearly
as part of its medium term planning process. These objectives
were then incorporated as part of the budgeting and planning cycle
and supported by the use of both financial and non-financial key
performance indicators.
- Senior management from ARG and Experian made
presentations on risk to the Audit Committee which reported regularly
to the Board on the risks facing the Group’s businesses.
- The detailed assessment of strategic risks
is delegated to the Group Chief Executive. His review was carried
out as part of the annual budgeting and the monthly reporting
and re-forecasting cycles.
- The Audit Committee has delegated responsibility from the Board for considering operational, financial and compliance risks on a regular basis and received its annual report on the controls over these risks. This included risks arising from social, environmental and ethical matters.
Control environment and control activities:
- The Group consists of two major trading
divisions, ARG and Experian each with its own management and control
structures.
- The Group has established procedures for
delegated authority which ensure that decisions that are significant,
either because of the value or the impact on other parts of the
Group, are taken at an appropriate level.
- The Group has implemented appropriate strategies
to deal with each significant risk that has been identified. These
strategies include internal controls, insurance and specialised
treasury instruments.
- The Group sets out principles, policies and standards to be adhered to by ARG and Experian. These include risk identification, management and reporting standards, ethical principles and practice, accounting policy, treasury policy and policy on fraud and whistleblowing. The divisions operate within this framework under their own policies and procedures laid down in organisation and authority manuals.
Information and communication:
- The Group has a comprehensive system of budgetary
control including monthly performance reviews for each major business.
These reviews are at a detailed level within ARG and Experian
and at a high level for the Board.
- On a monthly basis, the achievement of business
objectives, both financial and non-financial, was assessed using
a range of performance indicators. These indicators were regularly
reviewed to ensure that they remain relevant and reliable.
- The Group had whistleblowing procedures in place for employees to report suspected improprieties.
Monitoring:
- A range of procedures was used to monitor
the effective application of internal control in the Group, including
management assurance through confirmation of compliance with standards,
and independent assurance through internal audit reviews and review
by specialist third parties.
- The internal audit department’s responsibilities
include reporting to the Audit Committee on the effectiveness
of internal control systems focusing on those areas considered
to be of greatest risk to the Group.
- Follow-up processes were used to ensure there was an appropriate response to changes and developments in risks and the control environment.
Relations with institutional shareholders
The Company recognises the importance of communicating with its shareholders and does this through its Annual and Interim Reports, at the Annual General Meeting and through the processes described below.
Although most shareholder contact is with the Group Chief Executive and the Group Finance Director, supported by management specialising in investor relations, it is the responsibility of the Board as a whole to ensure that a satisfactory dialogue with shareholders takes place.
At each of its scheduled Board meetings, the Board reviews a summary report of all important or relevant issues raised by shareholders during the course of meetings and discussions with them. Additionally, the Board (and in particular, the non-executive directors) obtains an independent insight into the views of major shareholders by annually commissioning research from a third party adviser across a balanced sample of GUS shareholders. The latter typically control some 20 to 30 per cent of the Company’s issued share capital. The findings of the research are presented to the Board by the third party adviser.
Through these processes, the Board is kept abreast of key issues. There is also a direct line of communication to the Chairman available to shareholders particularly if there are issues of concern, whether about performance, strategy or governance. During the year, the Chairman wrote to the company’s largest shareholders emphasising the importance the Board attaches to open communication and confirming his availability to meet with them. The Chairman also confirmed the availability of Sir Alan Rudge, as senior independent director, should shareholders have concerns which contact through the normal channels of the Chairman, the Group Chief Executive and the Group Finance Director had failed to resolve or for which such contact was inappropriate. Shareholders were also offered the opportunity to meet the Company’s nonexecutive directors.
Shareholders who do not support a particular AGM resolution do not always seek engagement with the Company to explain their actions or request further information. The Company is keen to understand their reasons for the lack of support and to have a dialogue with shareholders on these issues. Its policy, therefore, insofar as is practicable, is to seek engagement with shareholders on such issues.
Directors, including the Chairmen of the Audit and Remuneration Committees, attend the Annual General Meeting and are available to answer shareholders’ questions. Voting at the Annual General Meeting is by way of a show of hands by members present at the meeting unless a poll is validly called. Following each vote on a show of hands, unless a poll is validly called, the level of proxies lodged on each resolution, the balance for and against the resolution and the number of abstentions is displayed. The results of voting at the Annual General Meeting are also added to the Company’s website as soon as possible after each meeting.
Corporate responsibility
At GUS we have interpreted Corporate Responsibility (CR) to mean taking due regard of society’s expectations of large companies: expectations which seem to be for steadily higher standards of conduct and for the Company to take increased responsibility for the direct and indirect effects of its operations. Our understanding can be set out as follows:
- The principal duty of the Group is to maximise
return to its shareholders but it must do so in a manner consistent
with legal and ethical norms in the societies that it operates
within. These norms lead to a set of explicit and implicit ethical
obligations for the Company.
- Failure to recognise appropriate ethical
obligations can lead to sanctions against the Company that will
damage its performance or assets. This is not judged to be in
the interests of shareholders.
- Companies that are quick to respond to shifts
in social attitudes are often better placed to take advantage
of new markets and opportunities as they arise. A company with
a positive social reputation will also benefit from increased
customer and employee loyalty, leading in turn to advocacy on
its behalf from these important groups.
- An important element of the management of
CR is therefore its identification of risks and opportunities
arising from a more holistic understanding of the social context
of the Group’s businesses than might otherwise have been the case.
- A large and complex group like the GUS Group cannot satisfy every individual stakeholder on every one of their concerns. Therefore, GUS seeks to prioritise its response based on the current and likely future significance of the issue to the business.
We therefore concentrate on ensuring compliance with the explicit norms (regulations, laws etc), but also include implicit norms and the possible sanctions into our management of risk, and constantly scan the horizon for significant changes. This strategy is illustrated in the diagram below:
GUS has identified eight significant corporate responsibilities as its priorities: social and environmental topics that significantly affect our business. These have been compared against the conclusions of other commentators and stakeholders to ensure consistency with wider opinion.
To meet these responsibilities, GUS has set out a number of CR principles - broad statements of intent encapsulating our philosophy on CR. These are intended to underpin and provide direction for the group businesses
Supply chain
- Responsibility: Improving labour, environmental
and social practices in the Group’s supply chain.
- Statement of intent: We care about human rights in our own workplace and want to be sure that our suppliers and business partners demonstrate similar concern. We make these organisations aware of our requirements and take all reasonable steps to ensure they are met.
Employment practices
- Responsibility: Providing a working environment
that is conducive to the recruitment and retention of the widest
possible range of talented staff.
- Responsibility: Provision of a safe and healthy
place of work.
- Statement of intent: We are committed to high standards of employment practice and wish to be recognised as a good employer. We aim to reward people fairly and to provide equality of opportunity, personal development and training, and a safe and healthy workplace.
Customers
- Responsibility: Protection of consumer privacy
and the proper handling and use of customer information.
- Responsibility: Providing products of the
appropriate quality, including responsible product sourcing and
retailing, product safety and reliability.
- Responsibility: Serving customers to their
complete satisfaction.
- Statement of intent: We believe we serve the best interests of our customers by recognising them as individuals. We are committed to responding to their needs, providing what they want, respecting their privacy and making every effort to earn their trust.
Environment
- Responsibility: Improving the Group’s environmental
performance, principally our use of energy, the impact of our
transport fleet and our use of bulk materials such as paper and
packaging.
- Statement of intent: In GUS, we do not handle toxic substances or manage industrial processes. Nevertheless, GUS is one of the largest companies in the UK and it has a responsibility to consider its impact upon the environment. We are committed to continuous improvement in our environmental performance, particularly through minimising waste, increasing energy efficiency and reducing our consumption of materials.
Community relations
- Responsibility: Developing strong community
relationships in support of our business objectives.
- Statement of intent: We value our relationships with the community around us and believe that thriving businesses depend upon thriving communities. Our community programmes are therefore rooted in our business strategy and are an important management responsibility.
Managing our responsibilities
- Statement of intent: We are determined to
stay abreast of society’s expectations in social responsibility
and to implement change enthusiastically. We will listen hard
to our stakeholders and report honestly on our actions and progress.
- Statement of intent: We know that we can
learn from other companies, as well as from the many examples
of good practice within our own organisation. We will benchmark
our performance, both externally and internally, using quantifiable
performance indicators.
- Statement of intent: We believe that good corporate citizenship ultimately resides in the hearts and minds of our people. Our aim is to ensure that these wider social responsibilities influence the way we manage, reward and develop our people in order to become part of our culture.
As far as possible, GUS seeks to integrate the understanding and control of these issues in its mainstream business practice. The Group has a number of policies, procedures and verification systems in place to underpin its management in this area. These are described below, following the disclosure guidelines of the Association of British Insurers (ABI), which refer to social, ethical and environmental matters (SEE) in place of the term CR.
With regard to the Board
- The Board takes regular account of the significance
of social, environmental and ethical matters to the businesses
of the Company. The responsibility for such matters lies with
the Company Secretary who ensures that they feature regularly
on the Board’s agenda. The Corporate Governance Committee also
keeps under review the Group’s policies in relation to CR and
external stakeholders’ views on CR issues. The Company Secretary
is supported in this work by a CR group which meets under his
chairmanship and which draws on staff with relevant expertise
from across all of the Group’s businesses. It includes experts
in communication, risk management, internal audit, community affairs,
consumer rights and the environment. It is supported by external
advisers.
- There is an ongoing process for identifying,
evaluating and managing the significant risks faced by the Group.
This process includes the identification and assessment of the
significant risks to the Company’s short and long term value arising
from SEE matters, as well as the opportunities to enhance value
that may arise from an appropriate response.
- The Board receives adequate information to make this assessment and, in this context, reference should be made to the key procedures described earlier in the section on accountability and audit. Account is taken of SEE matters in any training programmes deemed appropriate on the appointment of new directors.
With regard to policies, procedures and verification
- The Board has identified supply chain issues
as an area of potential risk that might significantly affect the
Company’s short and long term value. GUS has substantial buying
power, giving it some degree of responsibility for the actions
of the suppliers with which it deals. GUS takes seriously its
own social responsibility and seeks to guard against the risk
to its reputation through a potential association with undesirable
practices. To this end, the Board has approved a set of Principles
that merchandise suppliers and business partners are asked to
endorse. These are set out in more detail in the separately published
CR Report. Third party audit programmes are now in place in ARG,
with merchandise suppliers and business partners being selected
for audit based on risk and significance to the business. The
Experian supply base presents, in general, a much lower risk of
social and labour concerns.
- The Group has a range of policies and procedures
covering the other CR issues identified above which are described
in the separately published CR Report.
- The Company’s policies and procedures for
managing risks to short and long term value arising from SEE matters
are as described earlier in the section on accountability and
audit.
- An important aspect of the Company’s SEE
procedures is that they should be subject to verification. Internal
audits covering CR areas are undertaken on an annual basis, either
directly sponsored by the CR Group or undertaken as part of the
general audit assurance plan. In the year under review, the audits
included data protection reviews, health and safety compliance,
HR compliance, reviews of supplier sustainability and an audit
covering the Waste Electrical and Electronic Equipment (“WEEE”)
legislation, as well as a number of audits aimed at providing
assurance over our ability to serve customers to their complete
satisfaction.
- External verification is provided by Acona, a CR consultancy practice. Partners from Acona advise GUS on matters relating to CR, including taking part in the CR group and CR reporting activity. Specifically with regard to CR reporting, Acona reviews data collection systems and examines the data for completeness and accuracy. It also verifies that all claims in the report can be supported by evidence. The conclusions from Acona’s work are available in full in the separately published CR Report.
Performance highlights
A detailed review of the Group’s performance against its principal CR responsibilities can be found in the CR Report, but important developments during the year under review included:
- Experian Employee Health (North America):
Experian in North America is seeing the benefits of its HealthMatters
programme which aims to improve employee health and also to help
lower the company’s overall health care costs. 78% of employees
took the health assessment and most have signed up for health
improvement programs. At December 2005, 326 employees had increased
their exercise to at least three times per week, 94 employees
had stopped using tobacco and 214 had reduced their weight to
a healthy level.
- Experian’s work on financial literacy
(UK): Experian has continued its drive
to help improve financial literacy. A new resource called ‘Getting
credit: A beginner’s guide’ has been developed in conjunction
with the Basic Skills Agency to help teachers deliver numeracy
and financial literacy content. A teacher’s pack and set of lesson
plans are available which follow a consumer choosing, applying
for and managing credit. The pack was awarded the Personal Finance
Education Group quality mark in March 2006.
- ARG community programme:
Argos launched ‘Tick to Give’ - a customer fundraising scheme
in support of its charity partner Help the Hospices. Argos customers
are invited to tick a box on their product selection slips if
they wish to make a donation to the charity. When the slip is
taken to the till, 20p is added to the final total, which is then
donated to the charity. In its first few months this very simple
system has already raised £30,000, and seems likely to collect
around £100,000 p.a.
- ARG supplier programme: The coverage of ARG’s audit programme has continued to increase such that 72% of direct source vendors (by turnover) have been audited, many of them several times. ARG has worked with a number of suppliers during 2005/6 to offer detailed guidance on its Code of Practice: the company has produced a comprehensive guide for suppliers, illustrated with photographs intended to help the management of supplier companies understand how to improve. The guide has been translated into Mandarin Chinese and formed the basis of face to face presentations with 60 suppliers.
Community
GUS takes an active role in community activities, supporting charities and working directly with local projects:
- Taking part in these activities is popular
with our staff - they feel that they are contributing to their
communities and that the Company is supporting them in this. They
are also able to learn new skills when working together.
- Developing stronger communities, either locally
or nationally, has knock-on benefits for the business: It can
make customers feel more predisposed towards GUS, it can create
a better environment for commerce and trade and it can increase
awareness of the Company, attracting a wider pool of high quality
recruits.
- The resources of the Group can have a profound impact on charitable and community projects, through both direct giving and also through the in-kind contribution of the Group businesses.
As in previous years, the GUS community engagement programme in 2005/6 included two elements working together: the work of the GUS Charitable Trust and the activities planned and delivered through Experian and ARG. Many of the Group’s most successful projects have seen the cash contribution from the Trust being amplified by the in-kind support from the business, resulting in a gearing effect that doubles or triples the impact of the project.
The GUS Charitable Trust
The GUS Charitable Trust (“The Trust”) is the principal channel for the Group’s direct financial support to community projects. These donations are often supplemented by in-kind contributions from the Group’s businesses such as the donation of goods, the supply of staff time or the provision of facilities.
The Trust, which is an independent registered charity, has three Trustees: Sir Victor Blank (Chairman), David Morris and Gordon Bentley.
It focuses on three areas:-
- Medical research.
- Work with children and the elderly.
- Education.
The Trust is also developing its support for environmental initiatives.
The Trust’s income from GUS in respect of the year ended 31 March 2006 was £1.1m. In that year the Trust made awards totalling £1.0m. Major awards were as follows:
| £'000 | |
| PRIME – an ME CFS project | 111 |
| Kidscape | 92 |
| Prostate Cancer Charter for Action | 75 |
| Disabled Living Foundation | 57 |
| Wavemakers | 50 |
| Help the Hospices | 50 |
| Business in the Community Breakfast Club | 50 |
| ICAN | 35 |
| Staywise/Royal Berkshire Fire Authority | 30 |
| National Library for the Blind | 26 |
| Connection at St Martins | 25 |
| CHICKS | 20 |
| Community Links | 20 |
| National Association of Toy Libraries | 20 |
| 661 |