Annual Report and Accounts 2016 Our Governance model is different
The Partnership operates under a written Constitution. The Constitution provides the Principles and Rules within which we aim to demonstrate, through Partners, customers and profit, that we are a better form of business.
John Lewis Partnership plc
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Our Governance model is different
The Partnership was one of the first UK businesses to have a written constitution establishing its governance structure. This was well before the advent of modern standards of corporate governance and the development of the framework of legislation, regulation and best practice standards in place today, including the UK Corporate Governance Code (the Code). In this section we explain how our governance structure is different to companies subject to the Code.
The Founder of the Partnership, John Spedan Lewis, recognised that it was essential to safeguard the values which had motivated him to sign away his personal ownership rights in a growing retail company to allow future generations of employees to take forward his vision of ‘industrial democracy’. Therefore he wanted to leave some clear guidelines for his successors, which were enshrined in the Trust settlements and Constitution.
The Partnership’s governance structure has seen the business flourish since 1928, through periods of economic recession and uncertainty, numerous world events, changes of government and seismic changes in customer behaviour and selling channels.
Throughout this time, the Principles of the Constitution have endured and generations of Partners have shared in the rewards of success. The challenge for Partners of today is to prove that a business which is not driven by the demands of outside shareholders and which sets high standards of behaviour can flourish in competitive conditions. The Partnership aims to demonstrate that adhering to the Constitution’s Principles and Rules enables us over the long-term to outperform companies with conventional ownership structures.
The Code was not written with co-owned businesses in mind. It was developed to protect shareholders of quoted companies as a guide to effective board practice and is based on the underlying principles of good governance: accountability, transparency, probity and focus on the sustainable success of an entity over the longer term.
Although the Partnership is exempt from compliance with the Code as it has no tradable equity capital listed on the London Stock Exchange, the Partnership Board has voluntarily adopted the Code on a comply or explain basis. The Code recognises that alternative governance arrangements may be justified, if good governance can be achieved by other means. As the Partnership’s Constitution and co-ownership model established its own unique governance structure, there are certain areas where the Partnership’s governance arrangements are distinctly different and do not comply with the Code.
The Code
The Code, published by the Financial Reporting Council, is available to view at
www.frc.org.uk. The Code was last updated in September 2014. Reporting on the revised Code provisions is included in this Annual Report and Accounts on page 99 in relation to Going Concern, page 54 in relation to an assessment of the principal risks facing the Company, page 99 for an assessment of the long-term viability of the Company, and pages 52 to 54 for details of how the Partnership Board monitors the Company’s risk management and internal control systems.
While being different, the Partnership’s governance model is broadly consistent with each of the Code’s Principles and offers the appropriate level of protection to Partners and other stakeholders. The Partnership acknowledges these differences as being part of the governance model that works for this business and has done so since 1928.
The main areas of difference are:
We do not have a separate Chairman and Chief Executive Page 76 >
We do not have a Senior Independent Director Page 76 >
A majority of the Partnership Board are not Non-Executive Directors Page 76 >
Our Directors do not retire by rotation Page 76 >
Our Board Committees are different Page 77 >
It’s Your Voice
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