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Corporate governance
Remuneration committee The committee comprises Messrs Davis, Walker and Duff, who chairs the committee, all of whom are independent within the definition set out in the Code. Mr Walker will step down from the committee on 31 October 2007 and Messrs Stein and Whybrow will be appointed to the committee with effect from that date. The committee met four times during the year and Director attendance for each meeting is shown in the table below. The committee has delegated authority to deal with remuneration matters on behalf of the Board and the Board’s Remuneration report. During the year, the committee reviewed and updated its terms of reference, copies of which are available from the Company Secretary or on the Company’s website at www.wolseley.com. The chairman of the committee attends the Annual General Meeting to respond to any shareholder questions that might be raised on the committee’s activities.
Treasury committee The committee comprises the Group Chief Executive, the Chief Financial Officer, who acts as its Chairman, and the Group Treasurer. The committee’s role is to consider treasury policy, tax matters and certain transactions on behalf of the Group within a framework delegated by the Board.
Executive committee The Executive Directors of the Company together with the Chief Business Development Officer, the Chief Operations Officer and the Group Company Secretary and General Counsel, meet at least eight times each year, often on the day before formal Board meetings. The committee addresses operational business issues and shares best practice, thereby allowing the Directors more time at Board meetings to focus on strategy.
Executive committee advisory group The Executive Committee Advisory Group comprises the Group Chief Information Officer, the Group Senior Vice President Supply Chain, the Group Senior Vice President Sourcing, the Director of Financial Reporting and Strategic Planning and the Group HR Director. The members of this group, who each have key roles in their own right, act as advisers to the Executive Committee.
Meetings attendance The following table shows the attendance of Directors at meetings of the Board, Audit and Remuneration Committees held during the year:
| Number of meetings held during the year to 31 July 2007 | Board 8 |
Audit 5 |
Remuneration 4 |
|---|---|---|---|
| G Davis | 7 | 3 | 4 |
| A J Duff | 8 | – | 4* |
| F N Hord | 6 | – | – |
| C A S Hornsby | 8 | – | – |
| R H Marchbank | 8 | – | – |
| J I K Murray | 8 | 5* | – |
| F W Roach | 8 | – | – |
| N M Stein | 8 | 5 | – |
| R M Walker | 7 | – | 3 |
| S P Webster | 8 | – | – |
| J W Whybrow | 8* | – | – |
| * Chairman |
Internal audit The internal audit function is fully independent of the day-to-day operations of the Group. It is involved in the assessment of the quality of risk management and internal control and helps to promote and further develop effective risk management within the businesses. Certain internal audit assignments (such as those requiring specialist expertise) continue to be outsourced by the Head of Internal Audit to KPMG LLP as required. A policy has been established regarding the recruitment of staff from both KPMG LLP and PricewaterhouseCoopers LLP. The Head of Internal Audit attends all Audit Committee meetings as well as having regular meetings with the chairman of that committee. The Audit Committee reviews key performance indicators relating to the activity of the department.
Internal control In a decentralised Group, where local management has considerable autonomy to run and develop their businesses, a well designed system of internal control is necessary to safeguard shareholders’ investment and the Company’s assets. The Directors have overall responsibility for the Group’s systems of internal control and for reviewing their effectiveness. In accordance with the guidance set out in the Turnbull Report ‘Internal Control: Guidance for Directors on the Combined Code’, an ongoing process has been established for identifying, managing and evaluating the risks faced by the Group and has been in place for the full financial year and up to the date on which the financial statements were approved.
The systems are designed to manage rather than eliminate business risk, safeguard the Group’s assets against material loss, fairly report the Group’s performance and position and to ensure compliance with relevant legislation, regulation and best practice including that related to social, environmental and ethical matters. The systems provide reasonable, not absolute, assurance against material misstatement or loss and are regularly reviewed by the Board to deal with changing circumstances.
A summary of the key financial risks inherent in the Group’s business is given in Performance review. Risk assessment and evaluation is an integral part of the annual planning cycle. Each business documents the strategic objectives and the effectiveness of the Group’s systems of internal control. As part of this review, each business area and function has been required to identify and document each significant risk, together with the mitigating actions implemented to manage, monitor and report to management on the effectiveness of these controls.
Group companies also submit risk management and internal control representation letters bi-annually to the Chief Financial Officer, with comments on the control environment within their operations. The Chief Financial Officer summarises these submissions for the Audit Committee and the Executive Committee. The chairman of the Audit Committee reports to the Board on any matters which have arisen from the committee’s review of the way in which the risk management and internal control processes have been applied or any breakdowns in, or exceptions to, these procedures. Group companies are also required to support the disclosures and attestations that the Group Chief Executive and Chief Financial Officer are required to give under the Sarbanes-Oxley Act. These processes have been in place throughout the year ended 31 July 2007 and have continued to the date of this report. The Board has reviewed the effectiveness of the Group’s system of internal control for the year under review and a summary of the principal control structures and processes in place across the Group is set out below.
Control structures Whilst the Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness, it has delegated responsibility for the risk management and internal control programme to the Chief Financial Officer. The detailed review of risk management and internal control has been delegated to the Audit Committee. The management of each Group company is responsible for risk management and internal control within its own business and for ensuring compliance with the Group’s policies and procedures. Each Group company has appointed a risk director whose primary role in such capacity is to ensure compliance by local management with the Group’s risk management and internal control programme. Both the internal and external auditors have reviewed the overall approach adopted by the Group towards its risk management activities so as to reinforce these internal control requirements.