J Sainsbury plc Board of Directors, Study notes of Business

Download J Sainsbury plc Board of Directors and more Study notes Business in PDF only on Docsity! J Sainsbury plc Board of Directors Martin Scicluna Chairman Date of appointment: 1 November 2018. Martin joined the Board as Chairman Designate and Non-Executive Director on 1 November 2018. He was appointed as Chairman of the Board on 10 March 2019. Committee membership: Chair of the Nomination Committee. Skills and experience: Martin brings a breadth of experience and leadership in both executive and non-executive roles. His previous roles include positions as the Chairman of Great Portland Estates plc, Senior Independent Director and Chair of the Audit Committee of Worldpay Inc., and Non-Executive Director and Chair of the Audit Committee of Lloyds Banking Group plc. He was a partner at Deloitte LLP for 26 years, serving as Chairman from 1995 to 2007, where his clients included Dixons, WH Smith, Alliance Unichem and Cadbury’s. Other current roles: Chairman of RSA Insurance Group plc. Mike Coupe Group Chief Executive Officer Date of appointment: 1 August 2007. Mike has served as an Executive Director since 1 August 2007 and as Group Chief Executive Officer since 9 July 2014. Committee membership: Corporate Responsibility and Sustainability Committee. Skills and experience: Appointed Group Chief Executive Officer on 9 July 2014, Mike has been a member of the Operating Board since October 2004. Mike has vast retail industry experience in trading, strategy, marketing, digital and online as well as multi-site store experience. He joined Sainsbury’s from Big Food Group where he was a board director of Big Food Group PLC and Managing Director of Iceland Food Stores. He previously worked for both Asda and Tesco PLC, where he served in a variety of senior management roles. Other current roles: Non-Executive Director of Greene King plc. Kevin O’Byrne Chief Financial Officer Date of appointment: 9 January 2017. Skills and experience: Kevin brings to the Board a wealth of retail and finance experience. Kevin was previously Chief Executive Officer of Poundland Group Limited until December 2016 and held executive roles at Kingfisher plc from 2008 to 2015, including Divisional Director UK, China and Turkey, Chief Executive Officer of B&Q UK & Ireland and Group Finance Director. He was previously Group Finance Director of Dixons Retail plc and European Finance Director of Quaker Oats. He was a Non-Executive Director of Land Securities Group PLC from 2008 to September 2017 where he was Chairman of the Audit Committee and Senior Independent Director. Other current roles: Non-Executive Director and Chairman of the Audit Committee of Centrica plc from 13 May 2019. Matt Brittin Non-Executive Director Date of appointment: 27 January 2011. Committee membership: Nomination Committee and Remuneration Committee. Skills and experience: Matt has extensive experience of running a high profile, fast moving, innovative, digital business. Since 2015, he has been responsible for Google’s business and operations in Europe, the Middle East and Africa and he’s been in leadership roles at Google since 2007. Prior to that, Matt spent much of his career in media and marketing, with particular interests in strategy, commercial development and sales performance. This included commercial and digital leadership roles in UK media. Other current roles: Google’s President – Europe, Middle East and Africa; and Director of The Media Trust. Brian Cassin Non-Executive Director Date of appointment: 1 April 2016. Committee membership: Audit Committee and Nomination Committee. Skills and experience: Brian brings present day experience of running a FTSE 40 group and of big data and analytics – topics of key importance to Sainsbury’s. Brian joined Experian plc as Chief Financial Officer in April 2012, a post he held until his appointment as Chief Executive Officer in July 2014. Prior to this, Brian spent his career in investment banking at Greenhill & Co where he was Managing Director and Partner. Brian has also held various roles at Baring Brothers International and at the London Stock Exchange. Other current roles: Chief Executive Officer of Experian plc. Jo Harlow Non-Executive Director Date of appointment: 11 September 2017. Committee membership: Chair of the Corporate Responsibility and Sustainability Committee and member of the Nomination Committee and Remuneration Committee. Skills and experience: Jo brings a wealth of experience in consumer-facing businesses and in the telecoms and technology industry, both in the UK and internationally. Jo spent 12 years in a variety of senior management roles with Nokia and Microsoft. Prior to this, she spent eight years at P&G and 11 years at Reebok in senior sales and marketing positions in both Europe and the US. Other current roles: Non-Executive Director of InterContinental Hotels plc; Non-Executive Director of Halma plc; and Member of the Supervisory Board of Ceconomy AG. John Rogers Chief Executive Officer of Sainsbury’s Argos Date of appointment: 19 July 2010. John served as Chief Financial Officer of J Sainsbury plc from 19 July 2010 until 5 September 2016 when he was appointed as Chief Executive Officer of Sainsbury’s Argos. Skills and experience: John has extensive experience in finance, strategy, digital, online, property and financial services. As Chief Financial Officer of J Sainsbury plc for six years, John had responsibility for finance, Group strategy, Sainsbury’s online, business development, property, procurement and operational efficiency. He also held various senior management roles in the Company between 2005 and 2010. John is a member of the Sainsbury’s Bank plc Board. Prior to Sainsbury’s, John was Group Finance Director for Hanover Acceptances, a diversified corporation with wholly owned subsidiaries in the food manufacturing, real estate and agri-business sectors. Other current roles: Non-Executive Director of Travis Perkins plc and Member of the Retail Sector Council. David Keens Non-Executive Director Date of appointment: 29 April 2015. Committee membership: Chair of the Audit Committee and a member of the Nomination Committee. Skills and experience: David has extensive retail experience and knowledge of consumer facing businesses, together with his core skills in finance. David was formerly Group Finance Director of next plc from 1991 to 2015 and their Group Treasurer from 1986 to 1991. Previous management experience includes nine years in the UK and overseas operations of multinational food manufacturer Nabisco and, prior to that, seven years in the accountancy profession. Other current roles: Non-Executive Director, Senior Independent Director and Chair of the Audit Committee of Auto Trader Group plc. Dame Susan Rice Senior Independent Director Date of appointment: 1 June 2013. Committee membership: Chair of the Remuneration Committee and a member of the Nomination Committee. Skills and experience: Susan has extensive experience as a Non-Executive Director, as well as in retail banking, financial services, leadership and sustainability. Her career in retail banking is particularly relevant to our ownership of Sainsbury’s Bank. Previously, Susan was a member of the First Minister’s Council of Economic Advisors, Managing Director of Lloyds Banking Group Scotland and was previously Chief Executive and then Chairman of Lloyds TSB Scotland plc. She has also held a range of other non-executive directorships including at the Bank of England and SSE plc. Other current roles: Chair of Scottish Water and Business Stream; Chair of the Scottish Fiscal Commission; Non-Executive Director of the North American Income Trust, C. Hoare and Co.; and Senior Independent Director of the North American Income Trust. Jean Tomlin Non-Executive Director Date of appointment: 1 January 2013. Committee Membership: Audit Committee, Corporate Responsibility and Sustainability Committee and Nomination Committee. Skills and experience: Jean has extensive experience and breadth of skills in human resources and corporate responsibility. Jean was formerly Director of HR, Workforce and Accreditation for The London Organising Committee of the Olympic and Paralympic Games, where she set the strategic direction to ensure the mobilisation of the combined 200,000-strong workforce including paid staff, volunteers and contractors, which represented the recruitment and mobilisation of the largest peacetime workforce and set the industry standard for volunteering with the highly acclaimed Games. She was previously Group HR Director at Marks and Spencer Group Plc, HR Director and founder member of Egg plc and Sales & Operations Director of Prudential Direct. Other current roles: Independent Board member of Capri Holdings Limited, Non-Executive Director of Hakluyt and Chief Executive Officer of Chanzo Limited. Key to Committee members Audit Committee Corporate Responsibility and Sustainability Committee Nomination Committee Remuneration Committee Denotes Chair of Committee Retirement in 2018/19 David Tyler retired from the Board on 9 March 2019 Life President Lord Sainsbury of Preston Candover KG 44 Governance J Sainsbury plc Annual Report 2019 Martin Scicluna Chairman Date of appointment: 1 November 2018. Martin joined the Board as Chairman Designate and Non-Executive Director on 1 November 2018. He was appointed as Chairman of the Board on 10 March 2019. Committee membership: Chair of the Nomination Committee. Skills and experience: Martin brings a breadth of experience and leadership in both executive and non-executive roles. His previous roles include positions as the Chairman of Great Portland Estates plc, Senior Independent Director and Chair of the Audit Committee of Worldpay Inc., and Non-Executive Director and Chair of the Audit Committee of Lloyds Banking Group plc. He was a partner at Deloitte LLP for 26 years, serving as Chairman from 1995 to 2007, where his clients included Dixons, WH Smith, Alliance Unichem and Cadbury’s. Other current roles: Chairman of RSA Insurance Group plc. Mike Coupe Group Chief Executive Officer Date of appointment: 1 August 2007. Mike has served as an Executive Director since 1 August 2007 and as Group Chief Executive Officer since 9 July 2014. Committee membership: Corporate Responsibility and Sustainability Committee. Skills and experience: Appointed Group Chief Executive Officer on 9 July 2014, Mike has been a member of the Operating Board since October 2004. Mike has vast retail industry experience in trading, strategy, marketing, digital and online as well as multi-site store experience. He joined Sainsbury’s from Big Food Group where he was a board director of Big Food Group PLC and Managing Director of Iceland Food Stores. He previously worked for both Asda and Tesco PLC, where he served in a variety of senior management roles. Other current roles: Non-Executive Director of Greene King plc. Kevin O’Byrne Chief Financial Officer Date of appointment: 9 January 2017. Skills and experience: Kevin brings to the Board a wealth of retail and finance experience. Kevin was previously Chief Executive Officer of Poundland Group Limited until December 2016 and held executive roles at Kingfisher plc from 2008 to 2015, including Divisional Director UK, China and Turkey, Chief Executive Officer of B&Q UK & Ireland and Group Finance Director. He was previously Group Finance Director of Dixons Retail plc and European Finance Director of Quaker Oats. He was a Non-Executive Director of Land Securities Group PLC from 2008 to September 2017 where he was Chairman of the Audit Committee and Senior Independent Director. Other current roles: Non-Executive Director and Chairman of the Audit Committee of Centrica plc from 13 May 2019. Matt Brittin Non-Executive Director Date of appointment: 27 January 2011. Committee membership: Nomination Committee and Remuneration Committee. Skills and experience: Matt has extensive experience of running a high profile, fast moving, innovative, digital business. Since 2015, he has been responsible for Google’s business and operations in Europe, the Middle East and Africa and he’s been in leadership roles at Google since 2007. Prior to that, Matt spent much of his career in media and marketing, with particular interests in strategy, commercial development and sales performance. This included commercial and digital leadership roles in UK media. Other current roles: Google’s President – Europe, Middle East and Africa; and Director of The Media Trust. Brian Cassin Non-Executive Director Date of appointment: 1 April 2016. Committee membership: Audit Committee and Nomination Committee. Skills and experience: Brian brings present day experience of running a FTSE 40 group and of big data and analytics – topics of key importance to Sainsbury’s. Brian joined Experian plc as Chief Financial Officer in April 2012, a post he held until his appointment as Chief Executive Officer in July 2014. Prior to this, Brian spent his career in investment banking at Greenhill & Co where he was Managing Director and Partner. Brian has also held various roles at Baring Brothers International and at the London Stock Exchange. Other current roles: Chief Executive Officer of Experian plc. Jo Harlow Non-Executive Director Date of appointment: 11 September 2017. Committee membership: Chair of the Corporate Responsibility and Sustainability Committee and member of the Nomination Committee and Remuneration Committee. Skills and experience: Jo brings a wealth of experience in consumer-facing businesses and in the telecoms and technology industry, both in the UK and internationally. Jo spent 12 years in a variety of senior management roles with Nokia and Microsoft. Prior to this, she spent eight years at P&G and 11 years at Reebok in senior sales and marketing positions in both Europe and the US. Other current roles: Non-Executive Director of InterContinental Hotels plc; Non-Executive Director of Halma plc; and Member of the Supervisory Board of Ceconomy AG. John Rogers Chief Executive Officer of Sainsbury’s Argos Date of appointment: 19 July 2010. John served as Chief Financial Officer of J Sainsbury plc from 19 July 2010 until 5 September 2016 when he was appointed as Chief Executive Officer of Sainsbury’s Argos. Skills and experience: John has extensive experience in finance, strategy, digital, online, property and financial services. As Chief Financial Officer of J Sainsbury plc for six years, John had responsibility for finance, Group strategy, Sainsbury’s online, business development, property, procurement and operational efficiency. He also held various senior management roles in the Company between 2005 and 2010. John is a member of the Sainsbury’s Bank plc Board. Prior to Sainsbury’s, John was Group Finance Director for Hanover Acceptances, a diversified corporation with wholly owned subsidiaries in the food manufacturing, real estate and agri-business sectors. Other current roles: Non-Executive Director of Travis Perkins plc and Member of the Retail Sector Council. David Keens Non-Executive Director Date of appointment: 29 April 2015. Committee membership: Chair of the Audit Committee and a member of the Nomination Committee. Skills and experience: David has extensive retail experience and knowledge of consumer facing businesses, together with his core skills in finance. David was formerly Group Finance Director of next plc from 1991 to 2015 and their Group Treasurer from 1986 to 1991. Previous management experience includes nine years in the UK and overseas operations of multinational food manufacturer Nabisco and, prior to that, seven years in the accountancy profession. Other current roles: Non-Executive Director, Senior Independent Director and Chair of the Audit Committee of Auto Trader Group plc. Dame Susan Rice Senior Independent Director Date of appointment: 1 June 2013. Committee membership: Chair of the Remuneration Committee and a member of the Nomination Committee. Skills and experience: Susan has extensive experience as a Non-Executive Director, as well as in retail banking, financial services, leadership and sustainability. Her career in retail banking is particularly relevant to our ownership of Sainsbury’s Bank. Previously, Susan was a member of the First Minister’s Council of Economic Advisors, Managing Director of Lloyds Banking Group Scotland and was previously Chief Executive and then Chairman of Lloyds TSB Scotland plc. She has also held a range of other non-executive directorships including at the Bank of England and SSE plc. Other current roles: Chair of Scottish Water and Business Stream; Chair of the Scottish Fiscal Commission; Non-Executive Director of the North American Income Trust, C. Hoare and Co.; and Senior Independent Director of the North American Income Trust. Jean Tomlin Non-Executive Director Date of appointment: 1 January 2013. Committee Membership: Audit Committee, Corporate Responsibility and Sustainability Committee and Nomination Committee. Skills and experience: Jean has extensive experience and breadth of skills in human resources and corporate responsibility. Jean was formerly Director of HR, Workforce and Accreditation for The London Organising Committee of the Olympic and Paralympic Games, where she set the strategic direction to ensure the mobilisation of the combined 200,000-strong workforce including paid staff, volunteers and contractors, which represented the recruitment and mobilisation of the largest peacetime workforce and set the industry standard for volunteering with the highly acclaimed Games. She was previously Group HR Director at Marks and Spencer Group Plc, HR Director and founder member of Egg plc and Sales & Operations Director of Prudential Direct. Other current roles: Independent Board member of Capri Holdings Limited, Non-Executive Director of Hakluyt and Chief Executive Officer of Chanzo Limited. Key to Committee members Audit Committee Corporate Responsibility and Sustainability Committee Nomination Committee Remuneration Committee Denotes Chair of Committee Retirement in 2018/19 David Tyler retired from the Board on 9 March 2019 Life President Lord Sainsbury of Preston Candover KG 45Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents Corporate Governance Dear Shareholder As I have said in my Chairman’s letter at the start of this report, I am delighted to have joined Sainsbury’s as your new Chairman. It is a great business with fantastic brands and a long and distinguished heritage, with a focus on customer service and very strong values. I joined the Board as Chairman Designate on 1 November 2018 and would like to thank David Tyler not only for his effective leadership of the Board and his overall contribution to the business during his chairmanship, but also for ensuring a smooth transition until he stepped down at the end of the financial year. I’m pleased to have joined a strong and diverse Board with a mix of men, women and ethnic backgrounds, that takes governance very seriously. The Board has an open and honest culture, a strong relationship with our experienced management team, and good engagement with colleagues and other stakeholders. Since I joined the Board I have had an extensive induction programme and this will continue in the year ahead. I have visited Sainsbury’s and Argos stores and distribution centres, meeting colleagues at all levels of the business, and have been struck by their passion, engagement and focus on customer service. This will stand us in good stead at a time of significant change in the retail sector. Details of my induction, to date, are set out on page 53. I have spoken in my Chairman’s letter of the Board’s disappointment in not being able to take the proposed merger with Asda Group Limited to a successful conclusion. The Board had been considering the benefits of combining the two businesses over an extended period and had taken decisive action to agree a merger that would have been in the interests of all our stakeholders. The Board remains confident that we have the right strategy in place. Sainsbury’s is a dynamic, multi-channel multi-product retailer with great assets, and a strong digital offer, complemented by Sainsbury’s Bank, Argos and Argos Financial Services. With 178,000 engaged colleagues ensuring that we provide the very best service to our customers, we believe that we are well placed to address the challenges of a dynamic retail sector. My priorities as Chairman will be to ensure that, with Mike Coupe and the experienced management team, we deliver our strategy and provide strong shareholder returns, a strengthened balance sheet and improved free cash flow. We will also continue engagement with our different stakeholders and our focus on increasing our diversity and inclusion at all levels of the business. More details on these important aspects of the Board’s oversight are set out in this report. Martin Scicluna Chairman Statement of Compliance The Board considers that the Company has complied in full with the provisions of the UK Corporate Governance Code 2016 (2016 Code) for the financial year ended 9 March 2019. The 2016 Code can be found at www.frc.org.uk. The way the Company has applied the principles of the 2016 Code is set out in the following Governance Report. With the publication in July 2018 of the new UK Corporate Governance Code 2018 (2018 Code), the Board has reviewed its governance initiatives and programmes. The 2018 Code applies to accounting periods beginning on or after 1 January 2019, and is applicable to the Company from the 2019/20 financial year. Whilst reporting on the Company’s compliance with the 2016 Code, the Company has also reported where possible in the spirit of the 2018 Code particularly on stakeholder engagement and remuneration, and is well placed to report fully against the requirements of the 2018 Code in our next Annual Report. 48 Governance J Sainsbury plc Annual Report 2019 Leadership and effectiveness Role of the Board The Board is collectively responsible for the long-term success of the Group and we achieve this through the creation and delivery of sustainable shareholder value. In addition to setting the Group’s strategy and overseeing its implementation by management, we provide leadership to the business including on culture, values and ethics, monitoring the Group’s overall financial performance, and ensuring effective corporate governance and succession planning. The Board is also responsible for ensuring that effective internal control and risk management systems are in place. The Matters Reserved for the Board can be found on our website at www.about.sainsburys.co.uk. Operating Board Matters not specifically reserved for the Board have been delegated to the Operating Board which is chaired by Mike Coupe. The Operating Board concentrates on the day-to-day management of the Group and the execution of the strategy set out by the Board. Each Operating Board member has a range of responsibilities which are detailed in their biographies on pages 46 and 47. To support its work, the Operating Board has delegated certain powers to the Operating Board Committees, each of which has approved Terms of Reference setting out its areas of responsibility. Sainsbury’s Bank Executive Committee The Sainsbury’s Bank Executive Committee is governed by the Sainsbury’s Bank plc Board, membership of which includes an independent Chairman and Non-Executive Directors. The Sainsbury’s Bank Executive Committee is responsible for the day-to-day management of Sainsbury’s Bank and executing the strategy set out by Sainsbury’s Bank plc. Peter Griffiths, the Bank’s Chief Executive Officer, is a member of the Operating Board and brings the Bank’s priorities and perspective into the Group’s overview. Committees Audit Committee The Audit Committee reviews the integrity of financial information prior to publication, oversees the systems of internal control and risk management and approves the internal and external audit process. It carries out in-depth reviews of specific risks, particularly information security and data governance. More details on page 60. Remuneration Committee The Remuneration Committee recommends and reviews the Remuneration Policy, ensuring it is aligned to the long-term success of the Group. It also approves the remuneration and benefits of Executive Directors and the Operating Board, and broader remuneration principles throughout the business. More details on page 70. Nomination Committee The Nomination Committee reviews the balance of skills, knowledge, experience, independence and diversity of the Board, and succession plans at Board and senior management levels. More details on page 58. Corporate Responsibility and Sustainability (CR&S) Committee The CR&S Committee reviews the sustainability strategy and the Company’s progress on the key corporate responsibility initiatives including our values, and colleague and customer engagement. More details on page 68. Operating Board Committees Food Management Board The Food Management Board is responsible for managing the business of Sainsbury’s Food and Grocery business, and developing and delivering its strategy. Sainsbury’s Argos Management Board The Sainsbury’s Argos Management Board has primary responsibility for Sainsbury’s general merchandise and clothing businesses and the day-to-day management of the Argos and Habitat operations including the development and implementation of strategy. Investment Board The Investment Board has delegated authority to approve Group capital investment within agreed financial limits. This includes, but is not limited to, store, supply chain, property, new business activity, and digital and technology investments. Group Data Governance Committee The Group Data Governance Committee has oversight of the programmes that deliver compliance with Data Protection, Data Security and Payment Card Industry data security standards across the Group. The Committee monitors and aligns the work across the programmes to ensure consistency of approach and understanding of risk. It oversees effective information security throughout the Group. Group Safety Committee The Group Safety Committee is responsible for implementing food safety, health & safety and fire safety management systems and oversees Group standards for the management and monitoring of colleague and customer safety. Group Diversity and Inclusion Steering Group The Group Diversity and Inclusion Steering Group is made up of four Operating Board sponsors, each of whom champions a strand of diversity, and is chaired by our Group HR Director, Angie Risley. The Group met six times in the year to govern progress and drive our inclusion strategy. Group Operational Resilience Committee The Group Operational Resilience Committee has been established this year to set the operational resilience strategy, including business continuity and disaster recovery arrangements, for the Group and monitors implementation. How we are governed The Board is the principal decision-making body in the Company. To assist with carrying out its responsibilities, the Board has formally delegated certain governance responsibilities to Board Committees. 49Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents 50 Governance J Sainsbury plc Annual Report 2019 Division of responsibilities Our Board comprises the Chairman, three Executive Directors and six independent Non-Executive Directors. Martin Scicluna joined the Board as a Non-Executive Director and Chairman Designate on 1 November 2018 and was appointed as Chairman on 10 March 2019, when David Tyler stood down from the role after nine years as Chairman. Each of their responsibilities are listed below. Division of responsibilities Chairman Martin Scicluna Responsible for the leadership and effectiveness of the Board and for setting the Board agenda. Ensures effective communication so that the Board is aware of the views of shareholders and other stakeholders. Promotes a culture of openness and debate in the boardroom and constructive relations between Executive and Non-Executive Directors. Group Chief Executive Officer Mike Coupe Responsible for the day-to-day management of the Group and for executing the strategy agreed by the Board. Creates a framework of strategy, values, culture and objectives to ensure the successful delivery of results for the Group and allocates management responsibilities accordingly. Responsible for managing risk within the framework set by the Board and creating a framework of internal controls. Executive Directors Kevin O’Byrne and John Rogers Support the Group Chief Executive in implementing the Group’s strategy and in the operational performance of the business. Their executive responsibilities are described on page 44. Senior Independent Director Dame Susan Rice Acts as a sounding board for the Chairman and a trusted intermediary for other Directors. Led the search for the Chairman as described on pages 58 and 59. Available to discuss with shareholders any concerns that cannot be resolved through the normal channels of communication with the Chairman or the Executive Directors. Leads the other Directors in the performance evaluation of the Chairman. Independent Non-Executive Directors Matt Brittin Brian Cassin Jo Harlow David Keens Jean Tomlin Responsible for bringing an external perspective, sound judgement and objectivity to the Board’s deliberations and decision-making. Support and constructively challenge the Executive Directors using their wide and varied experience. Monitor delivery of the agreed strategy within the risk management framework set by the Board. Independent of management and are free from any business or other relationships that could compromise their independence. Company Secretary and Corporate Services Director Tim Fallowfield Advises and assists the Board and the Chairman, particularly in relation to governance, Board evaluations, induction, training and formulating the agenda for Board meetings. Ensures that Board procedures are effective and there is good information flow to the Board and its Committees. How the Board operates The Board and its Committees have a scheduled forward programme of meetings to ensure that sufficient time is allocated to each key area and the Board’s time is used effectively. There is sufficient flexibility for items to be added to the agenda which enables us to focus on key matters relating to the business at the right time. In addition to eight scheduled meetings in 2018/19, there were a number of informal meetings, often at short notice and very well attended by all Board members, including updates on the proposed merger with Asda. The Chairman and Non-Executive Directors also met without the Executive Directors being present; and the Non-Executive Directors, led by the Senior Independent Director, met without the Executive Directors or the Chairman being present. Directors were made aware of the key discussions and decisions made at each of the four principal Committees – Audit, Nomination, Remuneration, and Corporate Responsibility and Sustainability. The Chair of each Committee provided a detailed summary at the Board meeting following the relevant Committee meeting. On the rare occasions that a Director is unavoidably unable to attend a meeting, they receive a briefing from the Chairman before the meeting so that their comments and input can be taken into account at the meeting and the Chairman provides an update to them after the meeting. The following table shows the attendance of Directors at scheduled Board meetings: Matt Brittin1 7(8) Susan Rice 8(8) Mike Coupe 8(8) John Rogers 8(8) Brian Cassin 8(8) Martin Scicluna2 3(3) Jo Harlow 8(8) Jean Tomlin 8(8) David Keens 8(8) David Tyler3 8(8) Kevin O’Byrne 8(8) Notes: The maximum number of meetings held during the year that each Director could attend is shown in brackets. 1 Matt Brittin was unable to attend a Board meeting due to a prior engagement. 2 Martin Scicluna joined the Board on 1 November 2018. 3 David Tyler stepped down from the Board on 9 March 2019. Director development Induction We have a comprehensive and tailored induction programme in place for Directors when they join the Board to enable them to gain an understanding of all aspects of the Group, including our strategy, culture, vision, values, sustainability, governance and the opportunities and challenges facing the business. Where a Director joins a Committee, the programme includes an induction to that Committee. On joining the Board, Martin Scicluna met individually with each Board and Operating Board member, and also with senior management from key areas of the business, to give him insight into their specific areas of responsibility. The Company Secretary and Corporate Services Director briefed him on Group policies, Board and Committee procedures, and core governance practice. Martin visited our major business locations at Sainsbury’s Argos in Milton Keynes, Sainsbury’s Food Online Fulfilment Centre in Bromley-by-Bow as well as stores, distribution centres and Sainsbury’s Archive. He attended the Group Strategy Conference, and the Audit and Remuneration Committee meetings as an observer. He also met with principal shareholders and key advisers. To support his induction, Martin received induction materials including recent Board and Committee papers and minutes, strategy papers, investor presentations, Matters Reserved for the Board, the Board Committees Terms of Reference, and Group policies. Framework of Chairman’s induction process Understanding the business Understanding the sector and environment Meet the Sainsbury’s internal team and advisers Visit Group operations — Business strategy and vision — Overview of each business area and its opportunities — Operating plans, current KPIs and targets — Group structure — Key business relationships and contracts — Key people and succession plans — Board and governance procedures — Board effectiveness reviews and actions — Main Board committees — Finance, treasury and tax overviews — Internal audit, risk and internal controls — Group risk profile and approach — Remuneration, reward and pensions — Customer trends — Consumer and regulatory environment, including relevant consumer and industry bodies — Brand perception and reputation — Analyst and investor perspectives — Key stakeholders — Directors — Committee Chairs — Company Secretary and Corporate Services Director — Members of the Operating Board — Senior management across the Group and in each business unit — Members of the external audit team — Remuneration consultants — Joint brokers — Legal and other advisers — Store visits — Sainsbury’s Argos in Milton Keynes — Online Fulfilment Centre in Bromley-by-Bow — Sainsbury’s Archives, Docklands Continuing development Non-Executive Directors continue to learn about the business by meeting with management, colleagues, suppliers and other stakeholders including in the ways described above. Other examples of continuing engagement with different aspects of the business are described below. Jo Harlow joined the Board in September 2017 and became the new Chair of the Corporate Responsibility and Sustainability Committee from May 2018. In that capacity, she has built her understanding by visiting Sainsbury’s suppliers. She also attended the Sainsbury’s Farming Conference and pre-conference event to strengthen her understanding of the topical issues facing Sainsbury’s supplier base, with a particular focus on sustainability. She met with the Chair and leaders of The Woodland Trust and discussed the current state of and opportunities for our long-term partnership with them. With the Board’s focus on culture and stakeholder engagement, she participated in the London School of Economics event on Sainsbury’s approach to culture and engagement and met with Sainsbury’s colleagues at both a ‘Talking Shop’ event in Bristol and a listening session with Great Place to Work representatives. She continued to enhance her understanding of our business by meeting with senior leaders in our Food and Grocery business, Sainsbury’s Argos, General Merchandise and Clothing, and Sainsbury’s Bank. As Audit Committee Chair, David Keens continued his oversight by meeting with teams across Group Finance to discuss aspects of internal controls. He reviewed business areas such as insurance, treasury funding and hedging with our internal audit team. He also attended disaster recovery tests of Sainsbury’s Argos’ systems in Coventry and held meetings with the Groceries Supplier Code Adjudicator. 53Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents Professional development and training To ensure the Board updates and refreshes their skills and knowledge, we have a programme to support Directors’ training and development requirements in relation to governance, investor expectations and regulatory impacts. This includes regular presentations from management on relevant governance matters. Both the Audit and Remuneration Committees received updates on relevant accounting and remuneration developments, trends and changing disclosure requirements from external advisers and management, and the Board received an update on the 2018 UK Corporate Governance Code. The Directors also had access to the advice of the Company Secretary and independent professional advice is available at the Company’s expense, if necessary, in fulfilling their duties and responsibilities. Director independence The Chairman satisfied the independence criteria of the 2016 Code on his appointment to the Board and all the Non-Executive Directors are considered to be independent. The independence of the Non-Executive Directors is closely monitored by the Board and formed part of the Board effectiveness review. Time commitment and conflicts of interest Prior to appointment, each prospective Non-Executive Director confirms that they will have sufficient time available to be able to discharge their responsibilities effectively and that they have no conflicts of interest, and this is discussed by the Board before any appointment is made. In addition, the Board reviews, in advance, requests by Directors wishing to undertake new responsibilities or directorships and considers both the time commitments involved and any potential conflicts. There is also an annual review of the conflicts of interest register to ensure it is up to date and that there are no new conflicts to review. No changes were recorded during the year which would impact the independence of any of the Directors. The Board supports Executive Directors having a non-executive directorship as part of their continuing development provided they have sufficient time to balance their commitments to the Group with any external role. Subject to Board approval, each Executive Director may have one non-executive director position. Whilst recognising the benefits of Non-Executive Directors having varied and broad experiences, the Board keeps in mind investor guidance and reviews the commitments of each Director annually. Throughout the year, all Directors have good attendance records at scheduled meetings, and demonstrated high levels of availability and responsiveness for additional meetings and discussions where these have been required. The Board remains confident that individual members continue to devote sufficient time to undertake their responsibilities effectively. Board evaluation We review our effectiveness as a Board on an annual basis, including an assessment of the Board and its Committees. The last external evaluation was carried out by Manchester Square Partners in 2016/17. The 2018/19 internal review was led by the Company Secretary and Corporate Services Director, Tim Fallowfield. The review was conducted from December 2018 to February 2019 and continued to explore the themes that were raised for action in the 2017/18 review. Board members completed a questionnaire, based on last year’s in order to be able to maintain continuity, which also incorporated recent developments in the business, strategy and governance practice. The Board reviewed its key decision-making processes during the year, particularly relating to the appointment of the new Chairman and the decision to merge with Asda. The Board also assessed its culture and engagement with stakeholders in line with the 2018 Code. Individual discussions were subsequently held with all Directors. The Company Secretary discussed the conclusions with the serving Chairman, David Tyler, and presented them to the Board. The Board discussed the key points and agreed certain actions. Findings of the 2018/19 review The Board concluded that it performs effectively and is well placed to lead the Company at a time of considerable change in the sector. There was strong alignment amongst the Directors on the key strategic issues facing the Group. The following were seen as particular strengths of the Board: — Focus, shared understanding and purpose — Board diversity — Culture of openness and debate — Chairman’s leadership of the Board — Group Chief Executive Officer’s leadership — Decision-making in key business projects — Executive response to challenge by the Non-Executive Directors — Strategic debate and engagement — Risk management The progress and actions can be found in the table on page 55. 54 Governance J Sainsbury plc Annual Report 2019 Key areas of focus from 2017/18 review Progress and actions implemented during 2018/19 Agreed actions for 2019/20 Culture and stakeholder engagement Whilst the Board and Committees were fully engaged with the Group’s strong values and culture, the Board felt that it would benefit from an in-depth session to pull all aspects of culture together with particular emphasis on colleague feedback and metrics. In addition, it would strengthen engagement with colleagues by meeting with the Great Place to Work Group twice a year to share some of the Board’s priorities and to hear what the key issues are for colleagues. Non-Executive Directors would also be invited to the ‘Talking Shop’ sessions that Operating Board Directors hold with colleague groups. Other stakeholder engagement would continue to be reported to the Board on a regular basis. The Board felt that good progress was being made on many aspects of engagement and it now has a deeper understanding of the Group’s values and culture. The Board’s activities on culture and engagement during the year are set out on pages 56 and 57. Continue to build on the current activities and the Board agenda to maintain oversight of the Group’s culture and to further engage with stakeholders. Determine the preferred method of engaging with colleagues, to comply with the 2018 Code, by learning more from the range of activities planned for the year. Business performance and strategic priorities In order to ensure the Board continues to provide appropriate oversight of the performance of each of the Group businesses, it would continue to focus on the KPIs by reviewing analyst reports and taking a broad perspective on the future of the sector. This would enable the Board to ensure that the KPIs reflect the key drivers of business performance in the sector going forward. The Board focusses on key business performance indicators and reviews the retail market at each meeting. Strategic in-depth reviews enable the Board to review emerging trends in detail. At the annual Strategy Conference, the Board had in-depth discussions on the industry background, consumers’ changing shopping habits and competitors, and considered the views of external analysts and investors. In a fast moving sector, the Board agreed to continue to focus on the KPIs of each business unit and the Group in the overall market, and to hold detailed discussions about the context and drivers of trading performance and value creation. Data security (new) The Board felt that oversight of, and assurance over, the Group’s plans and priorities for information security and data governance had progressed during the year, particularly as a result of the additional review sessions by the Audit Committee. This would continue to be a priority for the Audit Committee for the year ahead. Year 2 Review focussed on Year 1 issues raised and any new issues arising Year 1 Independent, externally facilitated review Year 3 Year 2 progress reviewed and areas of focus identified A combination of Board evaluation and Director appraisal Progress and actions implemented during 2018/19 Agreed actions for 2019/20 Board evaluation cycle 55Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents Nomination Committee Report Dear Shareholder This has been a busy year for the Committee, with our particular focus on appointing a new Chairman to succeed David Tyler, in addition to our usual programme overseeing talent, succession, diversity and inclusion. Principal role and responsibilities The responsibilities of the Nomination Committee include reviewing the balance of skills, knowledge, experience, independence and diversity of the Board and its Committees, and making recommendations to the Board for any changes. It is responsible for formulating plans for succession at Board and senior management levels, taking into account the challenges and opportunities facing the Company, and the skills and expertise needed to ensure the long-term success of the Group. The Committee’s Terms of Reference are available on the Company’s website www.about.sainsburys.co.uk. We announced in April 2018 that we had started the Chairman succession process, which I led with the Nomination Committee, in my role as Senior Independent Director. We conducted a comprehensive search, in line with best practice, which led to the appointment of Martin Scicluna. This is described in detail later in this report. The Committee’s other priorities are to monitor our succession plans at Board, Operating Board and senior management level, review our progress on becoming a more diverse and inclusive business and oversee the Group’s approach to resourcing the needs of the business, developing our colleagues and recruiting new talent. When the Board reviews the Group’s strategy in October, we take the opportunity to have a comprehensive update from Angie Risley, our Group HR Director, and Mike Coupe on each of these important matters. In a year of significant structural change, we are pleased that our senior leadership team has been stable and we are confident in the calibre of our management team. Appointments have been made throughout the business to support the delivery of our strategy, and our internal pipeline has further improved over the last year as a result of external recruitment and internal promotion. The Board recognises the benefits of diversity, both on the Board and throughout the business, as part of the Company’s objective of being ‘the most inclusive retailer where people love to work and shop’. This is a key part of the Board and Committees’ agendas, and at our October meeting we reviewed our progress in making the business more inclusive across each of our four inclusion streams of gender, ethnicity, LGBT and disability/carers. We reviewed the long list of actions that have been implemented to date and the opportunities for the year ahead, and are pleased to see that the gender and ethnicity balance of our senior population has improved year on year. The promotion of Clodagh Moriarty as Group Digital Director in June 2018 improved gender diversity on our Operating Board. We can also see that there is a strong list of activities to create a diverse pipeline of talent throughout the business, for both the shorter and longer term. As part of the Board evaluation exercise, we reviewed the Committee’s effectiveness. The Board considers that the Committee continues to be effective in its role of supporting the Board, and that the search for a new Chairman led to a very satisfactory outcome. We were delighted to appoint Martin Scicluna as our new Chairman. He brings a wealth of experience and leadership to the Group at a pivotal time. He joined the Board as Chairman Designate and Non-Executive Director in November and has worked closely with the outgoing Chairman, David Tyler, the Board and the senior management team to ensure a smooth transition. He became Chairman on the first day of the 2019/20 financial year. I’m sure that shareholders will join the Board in wishing him every success in his role at Sainsbury’s. Dame Susan Rice Senior Independent Director The Committee held one scheduled meeting in the year, together with several other ad hoc meetings pertaining to the Chairman’s search process and appointment. Attendance at scheduled Nomination Committee meetings: Martin Scicluna1 0(0) David Keens 1(1) Matt Brittin 1(1) Susan Rice 1(1) Brian Cassin 1(1) Jean Tomlin 1(1) Jo Harlow 1(1) David Tyler 1(1) The maximum number of meetings held during the year is shown in brackets. 1 Martin Scicluna joined the Board on 1 November 2018. 58 Governance J Sainsbury plc Annual Report 2019 Committee membership The Committee consists of independent Non-Executive Directors and all of the current Non-Executive Directors are members of the Committee. The Chairman of the Board is also the Chair of the Committee and the Company Secretary acts as the Secretary of the Committee. Mike Coupe and Angie Risley, Group HR Director, attend meetings by invitation. Succession planning As part of its succession planning, the Committee oversaw the search and appointment of Martin Scicluna as successor to David Tyler, who reached his ninth anniversary on the Board in 2018. Martin Scicluna’s recruitment was facilitated by Egon Zehnder, an independent executive search consultant which has no connection to the Company other than in assisting and facilitating in the search for senior management. The Committee held a number of additional unscheduled meetings as part of the appointment process as set out below: Identify With a detailed understanding of what was required for the role, Egon Zehnder identified an extensive and diverse list of potential candidates who were appraised by the Senior Independent Director against the agreed brief, key competencies and experience required for the role. This created a long list which was reviewed by the Committee to produce a shortlist. The agreed brief included key attributes such as previous experience, cultural fit, managing complex shareholder relationships, and driving transformation. Interview The shortlisted candidates were interviewed by the Senior Independent Director and Group Chief Executive Officer and timings of the appointment and handover of the role were discussed. The preferred candidates met with all Non-Executive Directors, after which the Board and Nomination Committee members met to discuss feedback. Select Prior to the final selection and appointment, the Senior Independent Director obtained references from key stakeholders on the preferred candidate. The Committee was unanimous in its final selection and recommended to the Board that Martin Scicluna be appointed as Chairman given his breadth of experience and his fit to the key attributes in the agreed brief. It was also agreed that he be appointed to the Nomination Committee. Considerations Martin Scicluna’s other roles were considered prior to his appointment and the Board agreed that there was no conflict which might impact his role at Sainsbury’s. The Board also considered his other commitments from a time perspective, noting that he was Chairman at RSA Insurance Group plc, and that it had been announced that he would shortly be stepping down as Chairman of Great Portland Estates plc. He stood down on 31 January 2019. The Board considered that he would have sufficient time to fulfil his responsibilities to both the Company and RSA Insurance Group plc on an ongoing basis. Appoint Martin Scicluna’s appointment as a Non-Executive Director and Chairman-Designate took effect on 1 November 2018, with him being appointed as Chairman when David Tyler stepped down on 9 March 2019. Diversity and inclusion The Group’s aspiration is to be the most inclusive retailer, and the Board is highly supportive of the initiatives in place to promote diversity and inclusion throughout the business. Clear leadership of our inclusion agenda is set by Mike Coupe and the Operating Board, with senior management being set annual objectives to drive progress through the business. The Group Diversity and Inclusion Steering Group is chaired by the Group HR Director and is also attended by three other Operating Board Directors who champion each inclusion stream (gender, ethnicity, LGBT and disability/carers) with other senior leads from the different business units. The Board receives regular inclusion updates and both the CR&S Committee and the Nomination Committee receive detailed presentations on our inclusion priorities and the progress we are making throughout the year. More about these initiatives and the progress being made can be found on pages 26 and 27. The Board believes there is a good balance of diversity amongst our Non-Executive Directors, with several having extensive experience of retail and consumer-facing businesses and other highly relevant skills derived from serving in a range of major executive and non-executive positions throughout their careers. The Board feels that diversity is one of its strengths and we will continue to appoint on merit whilst working hard to broaden the diversity of the talent pool. Currently, female representation on the Board equates to 30 per cent. Female representation on the Operating Board has increased with the appointment of Clodagh Moriarty and is currently 20 per cent. The representation of female divisional directors and senior management is 31 per cent. Men Women Board gender diversity 7 3 0-3 years 4-6 years 7-9 years Board tenure (Non-Executive Directors and Chairman) 3 3 1 Non BAME BAME BAME – Individuals of Black, East Asian, Latin American, Middle Eastern or South Asian ethno-cultural backgrounds Board ethnic diversity 9 1 Consumer/Customer Services E-commerce/Technology Financial Services Current or recent CEO/plc experience Finance/Accounting Skills matrix 6 8 6 6 9 59Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents Audit Committee Report Dear Shareholder The challenge for every Audit Committee is to maintain vigilance over business as usual whilst paying appropriate attention to the wider specific and general risks that all businesses face. This is my fourth letter to you as Audit Committee Chair, and it sets out how the Committee has addressed both routine and emerging topics during the year. Principal role and responsibilities The Audit Committee assists the Board in fulfilling its oversight responsibilities by reviewing and monitoring the integrity of the financial information provided to shareholders, the Company’s systems of internal control and risk management, the internal and external audit process, the auditors, and the process for compliance with relevant laws and regulations. The Committee’s Terms of Reference are available on the Company’s website www.about.sainsburys.co.uk The Committee operates a wide-ranging agenda which this year has included cyber security, data governance, the potential impact of Brexit and financial reporting standard changes. Cyber security and data governance remain high risk areas and are important for every business which uses significant amounts of data for operational efficiency and product delivery. The Committee received regular reports and presentations on these topics during the year. These were supplemented by sessions with senior IT security and data managers to obtain greater insight into Company processes and procedures. The direction and impact of Brexit remains uncertain. The Company has prepared for various scenarios, identifying where key risks lie and where appropriate mitigations are in place to reduce the impact on supply chains, customers and colleagues. The Committee will continue paying particular attention to potential Brexit impacts as the situation develops. The Committee has continued to monitor the Company’s financial performance and stress tested its ability to withstand potential shocks, such as from Brexit and other short-term risks. We have discussed medium- and long-term finance structures at meetings with Finance and Treasury managers (please refer to page 37 for our Statement of Viability). The Committee considers all accounting changes and approved the implementation of IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from Customer Contracts’, and reviewed the approach to implementation of the new IFRS 16 ‘Leases’. Specific activities apart, the Committee continued its ‘business as usual’ duties, which included the monitoring and review of internal and external auditor programmes, principal risks and the integrity of the Group’s financial statements. As Chair, I also meet independently with the internal and external auditors, the Chief Financial Officer, and Tax, Treasury and Finance managers. I have an open and professional relationship with all of them and retain a high degree of confidence in their capability and integrity. Committee members have individually or collectively visited various Group locations during the year including stores, distribution centres and the offices of Sainsbury’s, Sainsbury’s Argos and Sainsbury’s Bank. These site visits give us invaluable understanding and insights into the Group’s operations and risk management. The Committee’s effectiveness was considered as part of the Board evaluation process (please refer to pages 54 and 55). I am pleased to report that the Board considers that the Committee continues to be effective in its role supporting the Board. I would like to thank members of the Committee and all the colleagues who have contributed to our work, for their time and valuable contributions during what has been another busy year. David Keens Chair, Audit Committee Attendance at scheduled Audit Committee meetings: David Keens 4(4) Jean Tomlin 4(4) Brian Cassin 4(4) The maximum number of meetings held during the year is shown in brackets. 60 Governance J Sainsbury plc Annual Report 2019 Internal Audit Director of Internal Audit. The Director of Internal Audit reports to the Committee Chair and has direct access to all members of the Committee and the Chair. The purpose, authority and responsibility of Internal Audit are defined in the Internal Audit Charter, which the Committee reviews annually. Internal controls framework. See page 66. Management’s responsiveness to Internal Audit’s findings and recommendations. The Committee was provided with updates on Internal Audit’s findings and agreed actions at each meeting. Scope of the Internal Audit Plan. The scope of the Internal Audit Plan and subsequent amendments to the plan were reviewed and approved by the Committee. Effectiveness of the Internal Audit function. The Committee reviewed the Internal Audit department’s resources, budget, work programme, results and management’s implementation of required actions. The Director of Internal Audit provides an annual overview of Internal Audit’s performance to the Audit Committee, including performance against key performance indicators (KPIs) and stakeholder feedback. Areas of improvement are highlighted, together with actions to address these. These are used to assist in reviewing the effectiveness of Internal Audit. In 2017/18, an independent review of the function was completed by the newly-appointed Director of Internal Audit (in line with the requirements of the Institute of Internal Auditors), with external challenge and support provided by a suitably qualified external party. The Committee continues to monitor and review progress of key actions implemented from the review. The Committee concluded that Internal Audit continued to be effective. Other Committee’s effectiveness. The review of the Committee’s effectiveness formed part of the Board review. More details can be found on pages 54 and 55. Significant issues raised through the whistleblowing process. The Committee received updates at each meeting on significant whistleblowing incidents. The Committee Chair receives earlier notification of incidents that may develop into a significant incident. No issues arose that required the Committee to be updated ahead of a scheduled meeting. All issues were escalated to the relevant manager for investigation. The Committee reviewed and reported to the Board the consistency of whistleblowing arrangements across the Group and its application by the Company’s suppliers. Each of the Business Unit Directors are responsible for rolling out process amendments where appropriate. Updates on data governance and information security. Updates on the Data Governance Programme were provided during the year covering process improvements, progress against the implementation of a single GDPR framework across the Group, increased use of Group data clinics, and the focus on culture and discipline over the next year. The Committee received updates from the Group Chief Information Security Officer on plans which covered strategic risks, third party assurance programmes, cyber security and mitigation initiatives. Separate sessions on data governance and information security were held during the year. Area of focus Activity 63Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents Other continued Company’s compliance with the Groceries Supply Code of Practice. In 2010, the Groceries Supply Code of Practice (GSCOP) was implemented following the recommendation of the Competition Commission. Where applicable, each grocery retailer had to appoint a Code Compliance Officer (CCO) whose duties include hearing disputes between suppliers and the relevant retailer. Sainsbury’s has appointed the Director of Internal Audit as its CCO. GSCOP requires that each applicable grocery retailer delivers an annual compliance report to the Groceries Code Adjudicator (GCA), which has been approved by the Chair of the Audit Committee. A summary of the compliance report must be included in the Annual Report and Financial Statements, which is set out below. Summary Annual Compliance Report Sainsbury’s compliance with the Code is based on clear policies and procedures, mandatory training and regular monitoring of compliance. Sainsbury’s has dedicated internal resources to provide all relevant colleagues with day-to-day advice and guidance. The Trading Division’s compliance team, in consultation with Group Legal and the CCO, continues to assess the adequacy of policies and procedures in place to support GSCOP awareness and compliance. Collaboration between the Trading Division’s compliance team, Group Legal, Internal Audit and the CCO has been enhanced this year, helping to ensure that potential Code-related matters are identified promptly. Compliance results, including performance against KPIs, are reported to the Food Commercial Leadership Team quarterly. Additional assurance is provided by Internal Audit. A small number of potential breaches of GSCOP were received in the year. As at 9 March 2019, all but one of these had been resolved either within our Trading Division using standard escalation procedures or, in five of these cases, through discussions between the CCO and the supplier. Actions are in place to resolve the one case that is outstanding. None of these were pursued as formal Disputes with the CCO and none required referral to the GCA for Arbitration. Group Legal, the compliance team and the CCO review the root causes of the potential breaches to identify any areas for improvement and to agree actions with the business. The CCO and the Committee Chair meet with the GCA on a regular basis. Sainsbury’s continues to work collaboratively and positively with the GCA to proactively identify and address any areas for improvement in terms of GSCOP compliance. Over the year, one of these meetings was attended by the Food Commercial Director and other senior stakeholders from supply chain and trading to facilitate collaboration. Areas of focus this year included working to align our processes with the GCA’s forecasting best practice statement, refreshing our customer complaints process and reporting performance against a broader set of KPIs in relation to payments. Sainsbury’s is currently reviewing the outcomes from the GCA’s investigation into the Co-op to ascertain if any changes are required to achieve alignment. Ongoing material litigation. The Committee was updated at each meeting on all material litigation, and any potential impacts on financial reporting disclosures. Business continuity management. A number of desk top exercises were run during the year and lessons learnt were used to enhance the process. Crisis management sessions relating to data loss were held with the Operating Board. Area of focus Activity 64 Governance J Sainsbury plc Annual Report 2019 Significant financial and reporting matters The Committee considered the following significant financial and reporting issues during the year. Impairment of financial and non-financial assets A review for impairment triggers is performed at each reporting date by questioning if changes in the circumstances suggest the recoverable value of certain assets may be less than their carrying value (see note 2 of the consolidated financial statements). The Committee reviewed summary reports produced by management detailing the outcomes of the impairment assessment. No Group impairment triggers were identified in the year, however seven individual stores and one land bank site were impaired, totalling £3 million. Items excluded from underlying results Items excluded from underlying results are reviewed by the Committee, and the Committee is satisfied that the Group’s presentation of these items is clear and that further disclosure is included where appropriate. The Group continues to disclose additional information on all Alternative Performance Measures (APMs) used by the Group (see pages 185 to 187 of the financial statements). Accounting standards implemented during the year Management has implemented the following new accounting standards for the year commencing 11 March 2018: — IFRS 9 ‘Financial Instruments’ — IFRS 15 ‘Revenue from Customer Contracts’ The Committee has reviewed impact assessments provided by management and the supporting disclosures. Additional disclosures are included in note 1 of the consolidated financial statements. Accounting standards preparation – IFRS 16 Management are currently preparing for the implementation of new standard, IFRS 16 ‘Leases’, for the year commencing 10 March 2019. The Audit Committee received regular updates from management to ensure all necessary steps, to comply with the requirements of the new standard, were being taken. The Committee has considered management’s project approach and progress, including impact assessments. The Group intends to apply the fully retrospective approach on transition and will restate prior year comparatives. Additional disclosures are included in note 1 of the consolidated financial statements. Pensions accounting The Group’s balance sheet shows a pension surplus of £959 million, which comprises £9,983 million of assets, and £(9,024) million of liabilities. This compares to a net deficit in the prior year of £(257) million (see note 30 of the consolidated financial statements). The Committee reviewed a summary of the actuarial assumptions used in arriving at a valuation for the defined benefit pension scheme and was satisfied that they are reasonable. Supplier arrangements Supplier income is considered by the Committee. The majority is calculated through a formulaic process, and the Committee is satisfied with the controls in place to manage areas of judgement and estimation. The Committee ensures the Group provides income statement and balance sheet disclosures in its financial statements (see note 5 of the consolidated financial statements). Sainsbury’s Bank reporting The Committee receives updates on the key agenda items discussed at the Bank’s Audit Committee. These include accounting judgements and estimates, important operating and regulatory matters such as liquidity, cash flows, capital adequacy and risk management processes. The Chairs of the Bank’s Audit Committee and Risk Committee and the Bank’s Chief Financial Officer attend meetings of the Committee. During the year the accounting judgements and estimates reviewed by the Committee have included impairment assessments of the loans and advances due to Sainsbury’s Bank customers under IFRS 9 and progress on the Bank’s transition. Other matters The Committee has considered the risks associated with adjustments made to revenue and the IT environment within the External Audit Report. The Committee has concluded that the Group has appropriate procedures and controls in place not to include these as significant areas of judgement. 65Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents Corporate Responsibility and Sustainability Committee Report Dear Shareholder Our vision is to be the most trusted retailer, where people love to work and shop. As one of the UK’s largest retailers, with a global supply chain, we can make an important contribution to sustainable development in the UK and internationally. This year I was delighted to become Chair of the Corporate Responsibility and Sustainability Committee, which oversees our sustainability strategy, taking into account our Group vision and strategy. Our approach addresses both traditionally understood sustainability issues, such as sustainable supply chains, global climate change and environmental impacts, and broader topics critical to the sustainability of our business, benefiting our customers, colleagues and communities. Our Sustainability Plan is structured around our values – empowering people to live healthier lives, sourcing with integrity, respecting our environment, making a positive difference to our community and providing our colleagues with a great place to work. The Committee fulfils its responsibilities by reviewing and reporting on the progress against our Sustainability Plan. I am proud of the progress we have made this year on our Sustainability Plan. This includes a 35 per cent reduction in absolute carbon emissions against our 2005 baseline, achieving our 2020 goal early, and a record 87 per cent of stores having a community food partner, helping tackle food poverty in our communities and reducing food waste. I would like to thank Jean Tomlin for her inspirational leadership and work chairing the Committee for the last six years. Looking forward, we are currently developing our post-2020 plan, in discussion with our colleagues, partners and experts. We will be launching our new Sustainability Plan in the coming year, driving further positive change and helping address global and local challenges. Jo Harlow Chair, Corporate Responsibility and Sustainability Committee Attendance at scheduled Committee meetings. Meetings were also attended by David Tyler. Jo Harlow 2(2) Jean Tomlin 2(2) Mike Coupe 2(2) The maximum number of meetings held during the year is shown in brackets. Principal role and responsibilities The Committee’s principal role is to review the Group’s sustainability strategy for alignment with the Group’s culture, vision and strategy and assist the work of the Operating Board. With the Board, the Committee also plays a part in monitoring Group engagement with stakeholders, including customers, suppliers, communities and colleagues. 68 Governance J Sainsbury plc Annual Report 2019 Principal activities in the year This year we reviewed and refreshed the governance of our Sustainability Plan to align our approach across the Group and enable us to be more agile in a changing world. Updates included relaunching our Value Management Groups and giving colleagues a greater role. A new Sainsbury’s Foundation Advisory Board was also established to oversee social, economic and environmental activities in our Fairly Traded producer communities. Before each Committee meeting, members received insights on stakeholder views, including customers and colleagues, along with progress updates on each of our values and the overall Sustainability Plan. During meetings, we discussed our sustainability strategy and stakeholder engagement, reviewing our approach and receiving updates on key initiatives. Topics included our human rights approach, sustainability insight sessions for our colleagues across the Group, Sainsbury’s Fairly Traded tea pilot, Active Kids scheme and community programme. For more on sustainability progress, see Our values on pages 18 to 27. 69Governance J Sainsbury plc Annual Report 2019 Governance Report Strategic Report Financial Statem ents J Sainsbury plc Board Oversight of the sustainability strategy Chair: Martin Scicluna from March 2019 Corporate Responsibility and Sustainability Committee Reviews the sustainability strategy’s impact Chair: Jo Harlow from May 2018 Operating Board Defines Group-wide strategy, adapting to new regulatory requirements and trends. Reviews cross-value progress and signs off major investments Chair: Mike Coupe, Group Chief Executive Officer Value Management Groups Lead operational execution of sustainability activities by value, ensuring delivery of performance Health Management Group Chair: Judith Batchelar, Director of Sainsbury’s Brand Community Management Group Chair: Simon Roberts, Retail and Operations Director, Sainsbury’s Environment Management Group Chair: John Rogers, Chief Executive Officer Sainsbury’s Argos Sourcing with integrity Management Group Chair: James Brown, Director of Non-food Commercial, Sainsbury’s Argos Great place to work Management Group Chair: Angie Risley, Group HR Director