Marks & Spencer is a fine business with significant strengths. We are one of the UK’s leading retailers, with over 21 million people visiting our stores each week. We offer stylish, high quality, great value clothing and home products, as well as outstanding quality food, responsibly sourced from around 2,000 suppliers globally. We employ over 75,000 people in the UK and abroad and have over 600 UK stores as well as an expanding international business.

Our brand values are enduring – quality, value, service, innovation and trust. Our commitment to these values sets us apart from our competitors. Everything we do has one key goal: to build a sustainable business for the long term, generating shareholder value through consistent, profitable growth whilst making sure that our customers can always trust us to do the right thing.

We launched Plan A in January 2007 - our five-year ‘eco plan’ – which affects every aspect of how we do business so that we grow in a sustainable way and address challenges across five areas: climate change, waste, sustainable raw materials, fair partner and health.

My key accountability in my role as Chairman is to ensure that the Board achieves its full potential, with a balance of membership, a culture of integrity and respect and a collegiate atmosphere with high level debate. This includes input to strategy, effective risk management, communications with shareholders and an integrated approach to corporate social responsibility.

This document sets out our individual profiles, matters reserved to the Board and the terms of reference of Committees that support the Board in achieving its governance accountabilities. More information is available for Directors on the Board portal which will assist the induction, development, performance review and future succession of Board members. Honest and constructive feedback gained from individual and collective performance reviews will ensure that our time spent together in the boardroom is used to maximum effect.

Leadership and governance go hand-in-hand in a successful company. For both to work well you need a clear plan of what you want to achieve. This Governance Framework has been endorsed by the Board and is published on our website so that our shareholders and other key stakeholders can see the standards we set for ourselves. The commitment and focus of all our people, from the boardroom to the shop floor, remain crucial to the success of Marks & Spencer. 

Sir Stuart Rose
Chairman

As Deputy Chairman I am very pleased to support Stuart in the important task of ensuring the continued success of M&S. A strong Board makes a significant difference to a company’s ability to create value. Good governance encourages entrepreneurship and innovation within a framework of accountability. It provides the basis for sound commercial decision-making which is integral to successful, sustained corporate performance.

The Non-Executive Directors play a key governance role in protecting shareholders’ interests. They are independent and bring an external dimension to the Board. We will keep the governance structure under review to ensure a proper division of responsibilities and balance of power during the period of combined Chairman and Chief Executive.

Sir David Michels
Deputy Chairman

Role

• To ensure the Board achieves its full potential to build a sustainable business for the long term, generating shareholder value through consistent, profitable growth whilst making sure that our customers always trust us to do the right thing.
• To act within delegated authority from the Board for all aspects of the management of the Group, which includes developing appropriate business strategies for Board approval and achieving timely and effective implementation.

During the period of combined Chairman and Chief Executive (2008-11): to keep the Deputy Chairman regularly informed on all matters that may be of importance to the Group, including its current performance and progress; and to monitor performance of the Executive Directors in their increased responsibilities, whilst focusing on the strategic growth areas of the business.

Main responsibilities

1. To chair and lead all meetings of the Board, having agreed in advance the agenda with the Deputy Chairman. To ensure that the Directors receive accurate, timely and clear information and that they are properly briefed on the issues arising at Board meetings.
2. Together with the Deputy Chairman, to ensure that corporate governance is conducted in accordance with current best practice principles and in the interests of shareholders and that the Group complies with all relevant legislation.
3. To lead corporate strategic direction to develop appropriate business strategies for Board consideration and approval. To ensure that agreed strategies are successfully implemented by the Executive team and that risks are effectively assessed and managed.
4. To ensure that appropriate objectives and policies are adopted for each of the businesses of the Group, that the necessary financial and human resources are in place and that their performance is effectively monitored.
5. Together with the Deputy Chairman, to ensure that the Board is properly constituted and that successional plans are in place for appointments to the Board and to senior management.
6. To lead the Executive team, allocating responsibilities to individuals after consultation with the Deputy Chairman, to review their performance and make appropriate recommendations to the Remuneration Committee.
7. To act as principal spokesman for the Group on all major Company occasions (e.g. general meetings, results, presentations and public relations), other than those designated to the Deputy Chairman by agreement with the Chairman.
8. To chair general meetings of the Company and together with the Deputy Chairman, to ensure effective communication with shareholders, maintaining contact with principal investors and representative bodies on a regular basis, and keeping the Board informed.
9. To handle, in consultation with the Deputy Chairman, the relationships with governments, authorities, regulators and stakeholders.
10. To lead the Company’s processes for communicating to, and consulting with, employees.
11. To act as ambassador for the Group’s brand, values and business principles. To chair the How we do business Committee and to oversee the Group’s 5-year ‘eco plan’ – Plan A.
12. Together with the Deputy Chairman, to oversee the Corporate Governance Group, headed by the Group Secretary, which advises the Board on all governance matters.

Role

• To lead on all governance issues including conducting the annual review of Board effectiveness and ensuring that the performance of individual Directors is kept under review.
• To provide a communication channel between the Chairman and Non-Executive Directors and, when required, principal shareholders including representative bodies. This communication channel is in addition to and does not replace existing channels.

During the period of combined Chairman and Chief Executive (2008-11): to monitor the effectiveness of the role of Executive Chairman; independently to lead the process for succession of Chief Executive with a view to appointment by 2011 and to maintain contact with principal investors and representative bodies on a regular basis, keeping the Board informed.

Main Responsibilities

1. To ensure that all Directors receive accurate, timely and clear information, in particular about the Group’s performance, and develop a balanced understanding of the themes, issues and concerns of shareholders and other key stakeholders.
2. To take a lead on governance matters and ensure they are conducted in accordance with current best practice principles and in the interests of shareholders and that the Group complies with all relevant legislation.
3. To agree the Board agenda with the Chairman in advance of its meetings and to ensure that all Directors are enabled to play their full part in its activities.
4. To support the Chairman in ensuring that appropriate business strategies for the Group are developed for Board consideration and approval and successfully implemented.
5. To hold meetings with the Non-Executive Directors (NED's) without the Executive Directors present at least twice annually, to monitor and reflect on the effectiveness of the governance structure. To lead a meeting of the Non-Executive Directors at least annually to appraise the Chairman’s performance (taking into account the views of the Executive Directors) and to feedback results.
6. To chair the Nomination Committee which ensures that appropriate procedures are in place for the nomination, selection, training and evaluation of Directors and for successional plans. Together with the Chairman, to ensure that the Board is properly constituted and that successional plans are in place for appointments to the Board and to senior management.
7. To lead the programme for improved Board effectiveness, considering when external input is required. To ensure performance reviews of the Directors are undertaken to confirm they fulfil their Board and Committee roles and that they keep their skills and knowledge up-to-date.
8. Together with the respective Chairmen, to ensure that the Audit and Remuneration Committees properly perform their functions on behalf of shareholders.
9. To provide the Chairman with a focal point for communication with the NEDs and to provide whatever support the Chairman requires on behalf of the NEDs.
10. To ensure that the views of each NED are given due consideration and to be available for confidential discussions with NEDs who may have concerns which they believe have not been properly considered by the Board as a whole.
11. To be available to shareholders, if they have reason for concern which contact through the normal channels of Chairman, Chief Executive or Finance Director has failed to resolve or for which contact is inappropriate.
12. Together with the Chairman, to oversee the Corporate Governance Group, headed by the Group Secretary, which advises the Board on all governance matters.

Role

• To bring an independent and external dimension to the Board’s activities and play their part in relation to strategy, performance, risk and people.
• Within the spirit of partnership and mutual respect on the unitary Board, to support as well as constructively challenge and monitor the Executive team.

During the period of combined Chairman and Chief Executive (2008-11): to keep the governance structure under review to ensure appropriate safeguards are in place to protect shareholder interests. A strong independent NED representation will be maintained throughout this period to ensure effective operation of the Board and its Committees.

Main Responsibilities

1. To promote the success of the Company for the benefit of its shareholders as a whole.
2. To protect shareholders' interests through the key corporate governance Committees.
3. To challenge constructively and help develop proposals on strategy.
4. To scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance.
5. To satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust and defensible.
6. To determine appropriate levels of remuneration of Executive Directors and have a prime role in appointing, and where necessary removing, Executive Directors and in succession planning.
7. To ensure that the Company acts responsibly having due regard to its reputation.
8. In those areas in which the NED has particular knowledge, skill and experience, to ensure that they have applied the necessary care, skill and diligence required of a Director (Combined Code Schedule B – attached).

Committee Chairman

Chairmen of the principal corporate governance Committees (Audit, Remuneration and Nomination) will have the following additional responsibilities:

1. To agree agenda items in advance with Committee Secretary, who will issue the agenda/detailed papers the week before the meeting to maximise everyone's contribution to the meeting.
2. To agree an annual schedule of meetings in advance and where a member is unable to attend a meeting, to capture their input beforehand.
3. To report Committee activities and recommendations to the Group plc Board.
4. To review and update annually the Committee’s terms of reference and membership, recommending any changes to the Board, and to evaluate the Committee’s performance on a regular basis.

Guidance on liability of Non-Executive Directors: Care, Skill and Diligence

1. Although Non-Executive Directors and Executive Directors have as Board members the same legal duties and objectives, the time devoted to the Company's affairs is likely to be significantly less for a Non-Executive Director than for an Executive Director and the detailed knowledge and experience of a Company's affairs that could reasonably be expected of a Non-Executive Director will generally be less than for an Executive Director. These matters may be relevant in assessing the knowledge, skill and experience which may reasonably be expected of a Non-Executive Director and therefore the care, skill and diligence that a Non-Executive Director may be expected to exercise.
2. In this context, the following elements of the Code may also be particularly relevant.
   • In order to enable Directors to fulfil their duties, the Code states that:
     • The letter of appointment of the Director should set out the expected time commitment (Code provision A.4.4); and
     • The Board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. The Chairman is responsible for ensuring that the Directors are provided by management with accurate, timely and clear information (Code principle A.5).
   • Non-Executive Directors should themselves:
     • Undertake appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the Company (Code principle A.5 and provision A.5.1).
     • Seek appropriate clarification or amplification of information and, where necessary, take and follow appropriate professional advice. (Code principle A.5 and provision A.5.2).
     • Where they have concerns about the running of the Company or a proposed action, ensure that these are addressed by the Board and, to the extent that they are not resolved, ensure that they are recorded in the Board minutes (Code provision A.1.4).
     • Give a statement to the Board if they have such unresolved concerns on resignation (Code provisions A.1.4).
3. It is up to each Non-Executive Director to reach a view as to what is necessary in particular circumstances to comply with the duty of care, skill and diligence they owe as a Director to the Company. In considering whether or not a person is in breach of that duty, a court would take into account all relevant circumstances. These may include having regard to the above where relevant to the issue of liability of a Non-Executive Director.

Background

The principal role of all Directors is to manage the Company for the benefit of its shareholders. This has been derived from extensive case law over 250 years and is rooted in the 18th century law of trusts. All Directors are responsible for the stewardship of the Company's assets and have a monitoring role to ensure that the necessary controls are in place, and working. There is no distinction in law between Executive and Non-Executive Directors.

Shareholders rely on the Directors and auditors to act in the long-term interests of the Company in which they have invested their money. The independence of auditors and of Non-Executive Directors is paramount in making sure the necessary safeguards are in place. Institutional shareholders are also being encouraged to engage directly with companies when necessary.

Executive Directors

In addition to their monitoring role described above, Executive Directors have specific strategic and operational accountabilities for their respective areas of responsibility. They assist the Chief Executive in carrying out his delegated authority from the Board to ensure that agreed strategies are successfully implemented and that risks are effectively assessed and managed.

New Directors’ Duties

From 1 October 2007 the Companies Act 2006 introduced the statutory codification of Directors' duties to make the law more certain and accessible and so increase the level of Directors' knowledge and understanding of their duties. Broadly these reflect the existing common law position, with the exception of section 172 – the duty to promote the success of the Company – which introduces the wider stakeholder approach. However, Directors continue to owe their duty to the Company, ie shareholders generally, not to individual shareholders or to third parties. These duties apply to Board Directors only. However, they will want to ensure these wider considerations are understood within the Company and that these factors are taken into account as part of the overall commercial decision-making process.

Marks & Spencer already embraces the wider stakeholder approach, as reflected in our Code of Ethics which applies to all employees. We are also managing our impact on society and the environment through our ‘eco-plan’ – Plan A.

Companies Act 2006

The codified duties which became effective on 1 October 2007 are:

1. To act within powers (s171);
2. To promote the success of the Company (s172).
   A Director of a Company must act in the way he considers, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
   • the likely consequences of any decision in the long term;
   • the interests of the Company’s employees;
   • the need to foster relationships with suppliers, customers and others;
   • the impact of the Company’s operations on the community and the environment;
   • the desirability of maintaining a reputation for high standards of business conduct;
   • the need to act fairly between members of the Company.
3. To exercise independent judgment (s173);
4. To exercise reasonable care, skill and diligence (s174);
5. To avoid conflicts of interest (s175);
6. Not to accept benefits from third parties (s176); and
7. To declare interest in proposed transaction or arrangement (s177).

Role

• Under the direction of the Chairman, to ensure good information flows within the Board and its Committees and between senior management and Non-Executive Directors, as well as facilitating induction and assisting with professional development as required. All Directors have access to the advice and services of the Secretary, who is responsible to the Board for ensuring that its procedures are complied with. Both the appointment and removal of the Secretary is a matter for the Board as a whole.

During the period of combined Chairman and Chief Executive (2008-11): the Group Secretary will have an additional reporting line to the Deputy Chairman to assist him in fulfilling his governance duties.

Main Responsibilities

• To act as a confidential sounding board to the Chairman and individual Directors and provide comprehensive practical support and guidance on their responsibilities: to promote the success of the Company for the benefit of its shareholders as a whole; and to protect shareholders' interests through the key corporate governance Committees.
• To be Secretary to the Board and the Audit, Remuneration and Nomination Committees and to facilitate accurate, timely and clear information to Directors so that they can properly perform their functions and maximise their contribution to decision-making.
• To alert Directors to matters which warrant the attention of the Board to ensure that the Company acts responsibly having due regard to its reputation. To provide a central source of guidance and advice on business ethics generally and corporate governance best practice as set out in the Combined Code.
• To ensure the procedure for the appointment of Directors is properly carried out, to facilitate their induction and assist in their on-going professional development.
• To ensure compliance with all legal and regulatory matters including the continuing obligations of the London Stock Exchange and Companies House filing requirements and that due regard is paid to the specific business interests of the Company.
• To communicate with shareholders as appropriate and ensure that due regard is paid to their interests, including payment of dividends, announcement of price-sensitive information, distribution of the annual report and collation of voting at the AGM.
• To keep the Board informed on the views of private investors who own a high percentage of shares compared to most other large UK companies and ensure communications and policies are appropriate to their needs.
• To maintain up-to-date Company records including register of shareholders, minutes of Board, Committee and General meetings, Articles of Association and Directors’ service contracts. To ensure proper administration of subsidiary companies, maintaining a record of the Group structure.
  
  In addition to the general duties set out above, the current Group Secretary has the following responsibilities:
  
• To be Chief Legal Adviser and Head of the Corporate Governance Group which supports the Board and its Committees on all governance matters as well as provides advice on a wide range of legal and insurance issues to commercial colleagues.
• To be a Trustee of the Board of Pension Trust to ensure proper running of the Pension Scheme, from the collection of contributions, to the investment of assets and payment of benefits.

The Combined Code on Corporate Governance

Every Company should be headed by an effective Board, which is collectively responsible for the success of the Company.

The Board's role is to provide entrepreneurial leadership of the Company within a framework of prudent and effective controls which enables risk to be assessed and managed. The Board should set the Company’s strategic aims, ensure that the necessary financial and human resources are in place for the Company to meet its objectives and review management performance. The Board should set the Company's values and standards and ensure that its obligations to its shareholders and others are understood and met.

All Directors must take decisions objectively in the interests of the Company.

Professional Advice

Where a Board Director considers it necessary in the furtherance of his or her duties to obtain independent professional advice he or she should, in the first instance, consult the Company Secretary who will, in appropriate circumstances, arrange for such advice to be made available at the Company’s expense. Advice can apply for matters related to the Board, its Committees or the office of Director generally.

The following matters are reserved to the Board for its decision:

Group Strategy

1. Overall Group strategy and corporate vision, setting standards and driving performance.
2. Creation, acquisition or disposal of corporate entities or assets which are material to the Group.
3. Evaluation of the Group’s competitive position and opportunities arising from the strategies and strengths of competitors.
4. Development and protection of the brand, its values and business principles.

Public Company

5. Public announcements required by law or by any regulatory authority (including current trading and dividend payments) and matters to be brought to the AGM.
6. Accountability for external relationships with shareholders, the investment community generally, other stakeholders and the media, and subsequent share price performance.
7. Matters of public interest that could affect the Group’s reputation, including:
   • environment, social, governance and health & safety policy;
   • corporate social responsibility policy and budget; and
   • donations, if any, to political parties.

Finance

8. Annual and interim reports and financial statements to shareholders.
9. Significant changes in accounting policy.
10. Group capital structure and dividend policy.
11. Three year and one year operating plans and key performance indicators including financial and non-financial information and contracted commitment with suppliers.
12. Group capital investment policy and any capital projects and expenditure that fall outside that policy. The monitoring of Group investments.
13. Group treasury and borrowing policies beyond that delegated to the Group Treasurer.

Risk Management, Internal Control and Audit

14. Safeguarding of Group assets to enhance over time the value of shareholders’ investment by identifying, evaluating and managing risk.
15. System of internal control and the review of its effectiveness (including financial, operational and compliance controls and risk management).
16. Annual Report of Internal Audit.
17. Annual Report of and relationship with the External Auditors.

Legal

18. Company’s Memorandum and Articles of Association and Seal signatories.
19. Prosecution, defence or settlement of material litigation and legal/regulatory compliance.
20. Grant of guarantees and indemnities, other than those issued in the ordinary course of operational business.
21. Allotment and repurchase of shares and the grant of employee share options within any delegated shareholder authority. Share Dealing Code.

Management and Remuneration

22. Board structure, composition and succession, including appointments to the Board for subsequent shareholder approval and succession planning for senior management.
23. Group management and reporting structures, business processes and structures.
24. Group remuneration policy, including reward policy and framework, employee bonus and share schemes, conditions of employment and pension scheme.
25. Appointments to the Board of Marks and Spencer plc and the following specific Group offices: Group Secretary, Chief Accountant, Chief Internal Auditor, Chief Legal Adviser.
26. Annual review of Board effectiveness including terms of reference of Committees established by the Board.