Woolworths Group plc - Corporate Governance

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Combined Code Statement

The Company recognises the importance of, and is committed to, high standards of Corporate Governance. During June 2007, upon Richard North becoming Chairman, and up to 31 January 2008, Non-Executive Directors made up less than half of the Board membership. An additional Non-Executive Director was appointed on 4 February 2008. With the exception of the aforementioned period, during the financial year, the Group has complied with the main and supporting principles of the 2006 Financial Reporting Council (FRC) Combined Code. Compliance with the principles of good governance and the specific provisions of Section 1 of the Combined Code has been effected by the Company in the following way:

Board of Directors

The Board comprises the Chairman, the Chief Executive, the Finance Director, two further Executive Directors and five Non-Executive Directors, appointed for periods of three years. The Board is satisfied that, having considered the background and current circumstances of each of the Non-Executive Directors, there are no relationships or other matters which could affect their respective judgement in carrying out their duties. Accordingly, the Non-Executive Directors are considered by the Board to be independent of management. Their biographies illustrate the Directors’ range of backgrounds which provide an experienced and balanced Board to lead and control the Group. Andrew Beeson is the senior independent Non-Executive Director. The Non-Executive Directors have disclosed to the Chairman and the Company Secretary their significant commitments other than their directorship of the Company. Similarly, the Chairman has discussed with the Board the time commitment expected from his various roles outside the Group. For both the Chairman and the Non-Executives, it has been agreed that all are able to meet their respective obligations to the Company, provided that any proposed changes or additional commitments are notified to the Board. All Directors have access to the Company Secretary and may take independent professional advice at the Company’s expense. Each Director may also receive appropriate training as necessary and a record of training undertaken is maintained by the Company Secretary.

The Board meets not less than 11 times a year and has adopted a schedule of matters reserved for its decision. The Board receives detailed proposal papers in advance of meetings, together with management presentations to facilitate proper consideration and debate of matters brought before it.

The Board is primarily responsible for the strategic direction of the Group. Major strategic initiatives involving significant cost or perceived risk are only undertaken following their full evaluation by the Board. Matters of an operational nature are delegated to the Group’s management. Progress on key initiatives is reported regularly and minuted, together with routine matters such as financial performance and current trading in each of the Group’s business divisions.

In accordance with Combined Code principles, the Board undertook a formal and rigorous evaluation of its own performance both as a board and on an individual basis (including the performance of the Chairman), and that of its core standing Committees. The process was administered by the Company Secretary and commenced with completion by the Directors of a detailed questionnaire. This followed the questions used in the prior year and sought views on the existing Board processes, and recommendations for areas to develop. Matters considered by the Directors included the suitability and structure of the standard agenda, the quality of presentation and time apportioned for debate on issues of strategy, financial reporting, and current trading.

The questionnaire also sought to measure the performance of the Directors in leading the Group toward its strategic and financial objectives, the respective skills and competencies of each of the Directors and to formulate areas of potential development to enhance further the Board’s ability to both challenge and support the Group.

The evaluation process has helped to identify and address important views held by the Directors as to the priorities going forward. For instance a common theme arising in the prior year was the need for more strategic analysis and Board debate around the challenges facing the Group. Given the limited time allowed by each routine meeting, this has been addressed by adding an additional Board “away day” to the Board calendar, with the agenda dedicated largely to matters of strategy.

In the coming year, as a consequence of the evaluation, a number of initiatives and recommendations to strengthen the effectiveness of the Board will be considered.

During the year 16 Board meetings were held. The Directors attended as follows during the year or since appointment:

Board of Directors’ Attendance


Andrew Beeson Trevor Bish-Jones Gerald Corbett (resigned 6 June 2007) Stephen East Fru Hazlitt Roger Jones Steve Lewis Richard North Tony Page David Simons CBE Lloyd Wigglesworth (resigned 31 January 2008)	14 16 7 16 14 16 16 16 16 15 15

The Board has established three core standing Committees, with defined terms of reference, as follows:

The Audit Committee

Chaired by Roger Jones, the Committee comprises those independent Non-Executive Directors listed below. This Committee is responsible for providing the Board with independent and objective assurance on the control environment across the Group, for ensuring that the subsidiary companies are subject to an internal audit of the required quality and for making recommendations to the Board on the appointment of auditors and the audit fee. It also reviews the performance of the Group’s auditors to ensure an independent, objective, professional and cost-effective relationship is maintained. The Committee’s terms of reference are available for download.

As well as reviewing the Company’s published financial results, the Committee reviews the Group’s corporate governance processes (including risk analysis), accounting policies and procedures, reporting to the Board on any control issues identified.

Internal audit plans and the relationship between the internal audit function and the external auditors are routinely assessed at Committee meetings. The Audit Committee has also sponsored the development of arrangements throughout the Group to deal, in confidence, with complaints from colleagues about any accounting or financial management impropriety or other questionable business practice or conduct. These arrangements are periodically reviewed.

To ensure the independence of the Group’s external auditors, the Committee has reviewed the relevant policies and practices of the external auditors. The rotation of key partners at appropriate intervals, in accordance with guidance provided by the Institute of Chartered Accountants in England and Wales, and monitoring the extent of non-audit work and related fees are established principles which are implemented as necessary and regularly reviewed by the Committee to safeguard the independence and objectivity of the external auditors.

Each of the Non-Executive Directors has, through their other business activities, significant experience in financial matters. In particular, David Simons CBE, who is a qualified FCMA, Andrew Beeson (a Non-Executive Director of Schroders plc and former Chairman of Evolution Group plc, a leading corporate finance and stockbroking business) and Richard North (who has held the position of Finance Director in two large businesses) have significant, recent and relevant experience of financial and accounting issues.

The Committee is also responsible for the proper reporting of the financial performance of the Group and for reviewing financial statements before publication.

The meetings of the Audit Committee are also the forum used by the Non-Executive Directors to meet without the Executive Directors present to discuss the performance of the Group, its management and their ongoing stewardship of shareholders’ interests. The Non-Executive Directors and the external auditors have the opportunity at this time to raise and discuss any issues of concern in this regard.

During the year three Audit Committee meetings were held. The Directors attended as follows during the year or since appointment:

The Audit Committee


Andrew Beeson Roger Jones David Simons CBE Richard North (resigned from Audit Committee June 2007)	3 3 3 1

Following his appointment to the Board on 4 February 2008, Peter Bamford will also serve on the Audit Committee.

The Nominations Committee

Comprising the Chairman and the Non-Executive Directors, the Committee is chaired by Richard North and is responsible for monitoring and reviewing the composition, balance and expertise of the Board and for reviewing and recommending appointments to the Board. Prospective appointments are considered by the Committee which agrees a detailed job description and the capabilities required for the role. The Committee generally engages external consultants to administer the search process, prepare a shortlist of potentially suitable candidates and to advise generally on prospective appointees. Only after a rigorous interview process is any appointment recommended to the Board. The terms of reference of the Committee are available dor download. The meetings of the Nominations Committee are also the forum used by the Chairman to meet with the Non-Executive Directors without the executives present to discuss any concerns about the running of the Company. During the year three Nominations Committee meetings were held. The Directors attended as follows during the year or since appointment:

Nominations Committee Attendance


Andrew Beeson Gerald Corbett (resigned 6 June 2007) Fru Hazlitt Roger Jones David Simons CBE Richard North	3 N/A 3 2 2 3

Following his appointment to the Board on 4 February 2008, Peter Bamford will also serve on the Nominations Committee.

The Remuneration Committee

Comprising the Group Chairman and the Non-Executive Directors named below, the Committee is chaired by Andrew Beeson. The Committee’s terms of reference are available for download. The Committee’s aim is to ensure that the Executive Directors are rewarded for their contribution to the Group and motivated to enhance the return to shareholders. The Remuneration Committee is responsible, on behalf of the Board, for the Group’s policy on the grant of share incentives to Executive Directors and other senior management as well as the specific remuneration and benefits packages for Executive Directors.

During the year three Remuneration Committee meetings were held. The Directors attended as follows during the year or since appointment:

Remuneration Committee Attendance


Andrew Beeson Fru Hazlitt Roger Jones David Simons CBE Richard North	3 2 3 3 3

The Corporate Social Responsibility Committee

The CSR Committee is chaired by the Company Secretary. Further details can be found on page 21 of the 2008 CSR report.

Accountability and Audit

Going Concern
A statement in accordance with the going concern principle is included in the Finance Director’s Report on page 19 of the 2008 CSR report.

Relations with Shareholders

The Company maintains an active dialogue with its investors through a planned programme of investor relations activities. This is a key component of its corporate communications programme and is headed by the Finance Director with the Chief Executive also attending the majority of these shareholder meetings.

The investor relations programme includes formal presentations in the UK and overseas (where appropriate) on full-year and interim results. One-to-one meetings between institutional investors and senior management are also held regularly.

Feedback from these meetings (including the non-attributed views of major institutional shareholders) is reported back to the Board. The Company Secretary is also charged with bringing to the attention of the Board any material matters of concern raised by the Company’s stakeholders, including private investors.

Communication with investors also takes place through the Annual and Interim Reports and via this Group website. In addition, the Annual General Meeting provides an important opportunity for communication with both institutional and private shareholders.

Internal Control

The Board of Directors has overall responsibility for the system of internal control and for reviewing its effectiveness throughout the Group. 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 effectiveness of the Group’s systems of internal control is reviewed by the Audit Committee on behalf of the Board.

The Board considers risk assessment and control to be fundamental to achieving its corporate objectives within an acceptable risk/reward profile, and confirms that there is an ongoing process for identifying and evaluating the significant risks faced by the Group and the effectiveness of related controls. The Board confirms that necessary actions have been or are being taken to remedy any significant failings or weaknesses identified from that process. This process is regularly reviewed by the Audit Committee and accords with the Turnbull guidance (2005). The key procedures in place to enable this responsibility to be discharged are:

The Board of Directors

has approved a set of policies, procedures and frameworks that are designed to facilitate the operation of effective internal control and which include the provision of quality internal and external reporting and compliance with applicable laws and regulations. These are periodically reviewed and updated;
regularly reviews the Group’s strategy and the strategies of the subsidiary companies;
reviews and assesses the Group’s key risks at least annually;
reviews performance through a comprehensive system of reporting, based on an annual budget with monthly business reviews against actual results, analysis of variances, key performance indicators and regular forecasting;
has well defined policies governing appraisal and approval of capital expenditure and treasury operations;
seeks assurance that effective control is being maintained through regular reports from the Audit Committee and the Internal and External Audit functions.

Each Operating Company Board

maintains systems for the continuous identification and evaluation of significant risks resulting from their strategies and their areas of the business;
self certifies that it is clearly accountable for establishing and monitoring internal controls within its business, that processes are in place to provide reasonable assurance that material business risks are identified and managed appropriately, that internal controls have been effected and that they comply with the Group’s policies; and reports on any control weaknesses or breakdown considered as material to the Group;
reviews and monitors the effectiveness of the system of internal control through reports from the Group Internal and External Audit functions.

The Internal Audit Function

is responsible for providing the Board with independent and objective assurance on the control environment across the Group and for ensuring that the subsidiary companies are subject to internal audit of the required quality.

These processes and organisational procedures enable the Directors to confirm that they have reviewed the effectiveness of the system of internal control.

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