"The Board... and the Group as a whole, needs to be aware of the interests of its employees, customers and suppliers and the Group's impact on wider society."
On behalf of the Board, I am pleased to present Ocado's Statement of Corporate Governance for 2017.
The Board is mindful of the corporate governance reforms and proposed changes in legislation that are intended to encourage responsible corporate behaviour. The reforms appear to be aimed at ensuring that in growing a business for the longer-term interests of its shareholders, a board is mindful of the company's broader purpose and its responsibilities to a broader stakeholder group. The Board, in its decision making processes, and the Group as a whole needs to be aware of the interests of its employees, customers and suppliers and the Group's impact on wider society. Delivering sustainable performance is core to the Board's regular deliberations, but we must ensure that we find appropriate time to engage with the Group's employees and get insight on our customers and supply base and our corporate responsibility plans. These reforms also highlight the importance of ensuring that the Company's purpose, strategy and values are fully aligned and clearly articulated. This Annual Report provides some information on engagement and other issues. We expect to report more fully on these matters when the new reporting requirements come into force next financial year. This information will help the reader understand how stakeholder relationships are taken into account in the Board's decision making as well as providing shareholders with information to allow them to understand the strategy, development, performance and impact of the Group's activity, including potential long-term outcomes.
Accountability and Risk
The Board periodically discusses risk management, the Group's risk appetite and the principal risks facing the Group. As well as debating principal risks and the potential impact on the business of the UK leaving the European Union we considered some risk areas in detail. The Group engaged external consultants to carry out a comprehensive review of our cyber security arrangements and to assess our data and information security controls and processes. Given the importance of these issues to the Group generally and the growth of the Ocado Solutions business, the Audit Committee will closely monitor the Group's cyber security plans.
The Audit Committee has played an important role in monitoring the Group's risk and assurance systems. Some of this oversight includes reviewing existing assurance arrangements and so external advisers were engaged to carry out a detailed review of the Internal Audit function. Implementation of the recommendations from the review will be monitored by the Audit Committee in 2018.
Remuneration and Engagement with Shareholders
Our Executive Director remuneration arrangements are designed to incentivise and support the achievement of our business objectives and sustain long-term value for shareholders. The Remuneration Committee oversees the Directors' Remuneration Policy, which received strong shareholder support at the annual general meeting on 3 May 2017. As the Group's strategy and development evolves we expect to continue to engage with our shareholders on changes to the executive remuneration arrangements.
Leadership and Board Effectiveness
The Board needs to ensure that we have the right people and leadership in our Group to support the strategy and plans of the Group. As well as reviewing management succession plans, the Board has considered Board composition. The report, put together by external consultants, concerned Board composition and succession plans and the existing and desired skill sets of the Board. This important piece of work will form the basis of Board discussions in 2018 as we consider the make-up of the Board that will best support the business as it moves into the next stage of development.
Our Senior Independent Director, Alex Mahon, retired from the Board after the period end on 13 December 2017. Alex was with Ocado for over five years and we thank her for her valuable contribution to the Company and the Board and wish her well in the future.
Ocado Group plc
6 February 2018
2017 Governance highlights
- Emma Lloyd joined the Board at the start of the period as a Non-Executive Director. Robert Gorrie retired from the Board in May 2017 and Alex Mahon retired from the Board following the period end in December 2017.
- A review of the Directors' Remuneration Policy completed by the Remuneration Committee and approved by shareholders at the 2017 annual general meeting.
- Remuneration consultant, PricewaterhouseCoopers LLP, appointed after a tender carried out by the Remuneration Committee.
- Auditor tender completed by the Audit Committee, which resulted in new external auditors, Deloitte LLP, being appointed at the 2017 annual general meeting.
- Recommendations from external 2016 Board evaluation largely implemented by management.
- Recommendations agreed by Audit Committee from external review of Internal Audit function.
- External report on Board composition and succession plans.
Statement of Corporate Governance
The Statement of Corporate Governance for 2017 covers the following areas:
- the structure and role of the Board and its committees;
- the Board's effectiveness;
- relations with the Company's shareholders and the AGM; and
- the reports of the Nomination Committee and the Audit Committee.
The report of the Remuneration Committee is set out separately in the Directors' Remuneration Report. The Group's risk management and internal control framework and the Group's principal risks and uncertainties are described in How We Manage Our Risks.
These sections form part of this Statement of Corporate Governance. The Directors' Remuneration Report, the Directors' Report and the going concern and viability statements in How We Manage Our Risks also contain information required to be included in this Statement of Corporate Governance, and so are incorporated into this statement by reference.