92


John Lewis Partnership plc Annual Report and Accounts 2015 Our governance approach (continued)


The Partnership Board continued


Meetings without the Executive Directors


In addition to attending Partnership Board meetings, the Non-Executive Directors and the Elected Directors meet together without the Executive Directors as required by the Code three times during the year. These meetings are facilitated by the Partners’ Counsellor.


Board independence


The Partnership Board has determined that the composition of the Board provides a balanced leadership, appropriate for a business that is co-owned by Partners. Together, Elected Directors and Non-Executive Directors form a majority of the Partnership Board.


Retirement by rotation


The Partnership does not operate a system of retirement by rotation or annual election by shareholders. The Partnership Board considers that a rigorous process of accountability exists to ensure compliance with the Partnership’s Constitution, especially Principle 1. The Constitution’s governance mechanisms provide opportunities throughout the year to review and scrutinise the efficacy of each Director.


Conflicts of interest


The Partnership Board maintains procedures that require the regular review of potential conflicts of interest. All Directors are required to declare pertinent interests and absent themselves from any discussion that might give rise to a conflict of interest. A register of interests is maintained by the General Counsel and Company Secretary.


At no time during the year did any Director hold a material interest in any contract of significance with the Partnership or any of its subsidiary undertakings, other than a third- party indemnity between each Director and the Company, as granted in accordance with the Company’s Articles of Association and service contracts between each Executive Director and the Company.


The Company also provides an indemnity for the benefit of each trustee of the Partnership’s Pension Fund, in respect of liabilities that may attach to them in their capacity as a trustee. As a Trustee of the Partnership’s Pension Fund, Patrick Lewis also has the benefit of this indemnity.


The Partnership Board has looked closely at the other appointments held by Directors, details of which are contained in their biographies on pages 94 to 95. The Partnership Board considers that the Chairman and each Director are able to devote sufficient time to fulfil the duties required of them under the terms of their contracts or letters of appointment.


Directors’ and Officers’ liability insurance


The Partnership has purchased and maintained throughout the year Directors’ and Officers’ liability insurance in respect of itself and its Directors.


Effectiveness of the Partnership Board


During the year, the Board undertook an internal evaluation of its own effectiveness facilitated through the ‘Thinking Board’ on-line self-assessment tool provided by Independent Audit Limited and supported by interviews with the Directors conducted by the Interim Director of Legal Services.


The key recommendations of the 2013/14 evaluation had been to review the role and responsibilities of each of the Committees, as well as their relationship and interactions with the Board and management, so that they are clearly defined and reflected within each Committee’s Terms of Reference. The Terms of Reference for the committees were subsequently reviewed in light of this recommendation. As a result, one of the key areas the 2014/15 evaluation was designed to assess was how effective this review had been. This year’s evaluation review concluded that the new Terms of Reference for the Committees provided the greater clarity identified as being required in the previous year’s evaluation.


Comply or explain? Board Independence


Code Provision B.1.2 states that at least half the Board, excluding the Chairman, should comprise Non-Executive Directors, determined by the Board to be independent. This supports the Code Principle that the Board should have the appropriate balance of skills, experience, independence and knowledge.


The Code does not contemplate nor does it give credit for employee directors on the boards of listed companies.


As at 31 January 2015 the Partnership Board included three Non-Executive Directors considered by the Code to be independent and therefore did not comply with this Code Provision. Instead, the Partnership Board reflects the stakeholders of the Partnership: the Partners’ Counsellor and the five Elected Directors are neither Executive Directors nor Non-Executive Directors. They are not part of the executive, as they do not hold executive responsibilities, nor do they hold a Director’s service contract. As Partners, they are co-owners of the Partnership.


While they are not independent, in accordance with the independence definition provided by Code Provision B.1.1, they test Partnership Board decisions and proposals by the executive from their perspective as Partners and co-owners, and while they must act in accordance with their statutory duties as Directors, they are also, through their Constitutional position, mindful of the Partners’ best interests as a whole.


The Partnership has voluntarily adopted the UK Corporate Governance Code on a comply or explain basis. For more information: Go to page 84,


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