Marks and Spencer : Governance 2022

GOVERNANCE

CHAIRMAN'S

GOVERNANCE OVERVIEW

''THE BOARD'S ROLE HAS BEEN TO

GUIDE THE BUSINESS THROUGH CHALLENGING HEADWINDS. ''

Archie Norman, Chairman

As outlined in my Chairman's letter on pages 2 to 3, macro events have had a significant impact on the business this year. My role, and that of the Board, has been to guide our way through these varied and challenging headwinds; ensuring our overarching strategy stays the course. Simultaneously, your Board has remained ready to respond and to adjust for external factors threatening to derail us.

In keeping with the demands made on the Board in these recent, turbulent years, circumstances have made it vital we remain highly engaged. We have been flexible with our time to support and challenge senior leadership, to ensure the continued acceleration of our transformation programmes, and not only to react to events, but have our eyes firmly fixed on the horizon into

2022 and beyond. Naturally, we continue to fulfil our other core duties to oversee M&S' governance, culture, financial controls, risk and change management.

The Governance section that follows is by intention concise, in keeping with our approach in previous years. Further detail on the Board, its Committees and our governance framework are available at marksandspencer.com/thecompany.

NAVIGATING HEADWINDS

The Board has had to remain vigilant alongside management this year and to stay abreast of current events impacting the business. We continue to deal with uncertainty in our European supply chain, as we enter the fourth Brexit extension period before complete customs checks are implemented. Meanwhile, we experienced a positive trading response

when Covid-19 restrictions were lifted at the start of 2022, but trading in the fourth quarter then slowed, with consumers conscious of cost of living increases amidst inflationary pressures.

The Board has proactively discussed with management how best to trade through these macro impacts, resulting in detailed stakeholder discussions in line with Section 172(1) of the Companies Act 2006 ("s.172(1)"). There has been no "one size fits all" answer across the business, and inevitably trade-offs between our stakeholders have been made. These have been allied with our strategic objectives and have included measures such as price and margin protections, supplier support and buying process improvements.

The invasion of Ukraine has materially impacted the business, as we have franchise agreements in both Ukraine and Russia. While we felt it was important to support colleagues and continue to trade in Ukraine for as long as possible, events have made that impossible. The Board and I are nonetheless heartened by the response from our customers and colleagues who have donated significantly to the aid effort. You can read more on our response on page 5.

Meanwhile, we have suspended shipments to our Russian franchise partner and directed them to cease trading. The result of this decision is that, following legal negotiations with our franchise partner, we have reached a settlement to exit fully our Russian franchise. While our franchise agreement was not captured under the sanctions regime, we strongly believe it is right and just to ensure we are not trading, even indirectly, in that jurisdiction while the war in Ukraine is ongoing.

NEW LEADERSHIP

Shareholders will have noted our recent announcement of a new leadership team structure. Before I outline this, I first want to express my and the business' thanks to Steve Rowe, our outgoing Chief Executive Officer. Steve has been a magnificent servant of M&S, dedicating 40 years to the Company, coming from the shop floor to lead the business. His career is testament to the opportunities M&S can provide for great people to succeed. The M&S he took over was in parlous shape and throughout my tenure as Chairman, he has been fearless in facing into the challenges and has delivered massive progress.

To replace Steve, we have chosen to promote our internal talent. With effect from 25 May 2022, Stuart Machin has become Chief Executive Officer, taking responsibility for day-to-day leadership of the business and the Executive Committee. He continues to have oversight of his current portfolio of responsibilities, including leadership of the Food business, Operations, Property, Store Development and Technology, and will also take responsibility for HR and Corporate Communications. Katie Bickerstaffe has become Co-Chief Executive Officer, with a particular focus on driving the future of Digital & Data, and of our global omni-channel business. She retains her existing portfolio of responsibility for Clothing & Home, MS2, International and Financial Services. Eoin Tonge has become Group CFO & Chief Strategy Officer. In addition to his current responsibilities, he will play an enhanced role in leading the future development of the business and will also take on oversight of Plan A.

56 Marks and Spencer Group plc

M&S is now embarking on the second phase of its transformation programme "Shaping the Future". The Board's view is that, under the leadership of Stuart, Katie and Eoin, the business has made remarkable progress and that continuity of strategy and leadership is the best approach for the Company. Bringing together these three outstanding leaders will provide the stability, pace and bandwidth required to accelerate the pace of change.

I would also like to note the contribution Andy Halford has made to the Board. Noting that his tenure has now reached nine years, he will be stepping down as Chair of the Audit Committee, with Evelyn Bourke replacing him as Chair. Having reviewed and confirmed that Andy remains independent, the Nomination Committee agrees that his role as Senior Independent Director ("SID") is an important constant while new Board members settle into their roles. He will therefore remain as SID and a member of the Audit Committee for a transitionary period, and will leave the Board by the end of 2022.

Board and Executive Committee biographies can be found on pages 60 to 62. Full details of these Board and executive changes, our assessment of the balance of leadership skills and experience, and our talent and succession processes, can be found in the Nomination Committee Report on pages 66 to 69.

BOARD ACTIVITIES AND CONSIDERATION OF STAKEHOLDERS

The Board's focus during the year

has been to accelerate the Company's pursuance of its strategic priorities, while steering through macro-induced headwinds. In our meetings, we have continued our approach of considering "strategic deep dives" presented by all areas of the business, which we have then debated and challenged. All while being mindful of the impact of any decisions made on the business' various stakeholders and on its long-term, sustainable success, in line with s.172(1).

An overview of the range of matters that the Board discussed and debated at its meetings during the year can be found on pages 63 to 64.

The Company's s.172(1) statement is available on pages 32 to 34.

EMBEDDING ESG

As explained in last year's Annual Report, the Board's Environmental, Social & Governance ("ESG") Sub-Committee was established to assist the Board in providing focus and oversight of the Plan A programme, both in its reinvigoration and its ongoing effectiveness. The report of the ESG Committee for 2021/22 is available on pages 70 to 77.

In demonstration of our commitment to embedding ESG across the organisation, sustainability is now one of the five strategic pillars comprising our corporate purpose. Furthermore, the business negotiated and entered a sustainability linked financing agreement for the first time. While we have strides to take on our Plan A agenda still, the Board, with the support of the ESG Committee, are focused on delivering tangible progress in the year ahead.

FUTURE SHAPING GOVERNANCE

The Company has made a number of strategic investments during the course of the year, following the acquisitions of 50% of Ocado Retail Limited in 2019 and of the Jaeger brand in 2020. In partnership with True Capital, we became the cornerstone investor in a Direct-to-Customer ("D2C") focused fund. We have also acquired a minority stake in Nobody's Child Limited, an exciting eco-conscious, affordable fashion brand, and have become the majority owner (with a route to 100% ownership) of The Sports Edit Limited,

an activewear platform with proven capability in brand curation and emerging brand identification.

Each of these investments is unique and, as such, the governance arrangements supporting them are bespoke for the nature of the investment and lifecycle of the businesses. This has required the Board to ensure we have the appropriate controls in place, not only to mitigate risk, but also to be a supportive and productive strategic investor.

DIVIDEND

While the balance sheet is strengthening, the Board and I believe on balance, and in line with our approach last year, that non-payment of a dividend is appropriate for the 2021/22 financial year. This continues to be one of the proactive steps we are taking to ensure the business is set up for success in the future.

AGM: STAYING DIGITAL

The Annual General Meeting ("AGM") provides investors with a valuable opportunity to communicate with the Board. We have learnt in recent years that digital meetings are more engaging, more democratic, and allow us to communicate and hear from more of our shareholders, with participation levels trebled at last year's meeting compared with the last physical meeting. In recognition, we will be conducting this year's AGM digitally once again. We strongly believe digitally- enabled meetings should become the default across the FTSE and I encourage other companies to follow our example.

In addition to being able to vote and submit questions electronically in advance, all shareholders will be able to join the meeting online to hear from Stuart, Katie, Eoin and me, ask questions and vote on our resolutions.

We will be joined by Anita Anand who will be acting as your shareholder advocate, sharing your views and questioning me and the Board on your behalf. If you would like us to hear from you directly, you also have the option of dialling in and asking your question live on the day, or submitting a video question to be played to the Board for response during the meeting. I look forward to hearing from you all then.

Information on how to participate electronically, both in advance and on the day, can be found on pages 208 to 209.

Archie Norman, Chairman

UK CORPORATE

GOVERNANCE CODE

The UK Corporate Governance Code 2018 (the "Code") which is available to view on the Financial Reporting Council's website is the standard against which we measured ourselves in 2021/22.

The Board confirms that we complied with all of the provisions set out in the Code for the period under review. Details on how we have applied the principles set out in the Code and how governance operates at M&S have been summarised throughout the Directors' Report. Our full Corporate Governance Statement outlining

our compliance is available online at marksandspencer.com/thecompany.

GOVERNANCE

Annual Report & Financial Statements 2022

57

GOVERNANCE

LEADERSHIP AND OVERSIGHT

Our governance framework facilitates responsive and effective decision-making,

ensuring that the Board and its Committees, the Executive Committee and senior management are

able to collaborate proactively, consider issues and respond.

BOARD COMMITTEES

BOARD

EXECUTIVE COMMITTEE

The Board is supported by its subcommittees in discharging its duties. At each Board meeting, the Chairs of the Committees provide an update on their Committee activities.

Audit Committee

See p78-84

Responsible for monitoring the integrity of the financial statements, reviewing the Group's risk framework and internal controls and maintaining

the auditor relationship.

Remuneration Committee See p85-107

Responsible for remuneration policy, performance-linked pay schemes and share-based incentive plans.

Nomination Committee

See p66-69

Responsible for reviewing Board composition and diversity, proposing new Board appointments and monitoring the Board's succession needs.

ESG Committee

See p70-77

Responsible for ensuring the Company's ESG strategy remains fit for purpose, and plans are in place and reported on. Advises the Audit Committee on ESG-related risks, including climate-related issues.

The Board is responsible for establishing the purpose, values and strategy for the M&S Group, ensuring our culture is aligned, overseeing our conduct and affairs,

and for promoting the success of M&S for the benefit of our members and stakeholders. The Board discharges some of its responsibilities directly and others through its sub-committees.

Terms of Reference for the Board and its sub-committeesare available in our governance framework, published on marksandspencer.com/thecompany.

Execution of the M&S strategy and day-to-day management is delegated to the Executive Committee, and subsequently to senior leadership forums where relevant, with the Board retaining responsibility for overseeing, guiding and holding management to account.

BOARD

The Executive Committee ("ExCo") is our leadership team responsible for executing strategy. It manages, monitors and provides the executive input underlying M&S' strategic and operational decisions, ensuring strong executive alignment on business priorities, investments and actions.

During the year, the ExCo consisted of the CEO, CFO, Chief Operating Officers, and the Managing Directors of each business unit. Authority is conferred on the ExCo by the Group Delegation of Authority,

as approved by the Board.

The ExCo reviews strategic opportunities and initiatives from the Group's key businesses and centralised functions, ensuring these contribute to and elevate the Board's overarching strategy. In addition, and in support of the Board's purpose, values and culture setting, the ExCo is responsible for all colleague matters, including the structure and operation of the HR function throughout the business, the development and monitoring of culture and values,

and reviewing talent and leadership development and succession plans below ExCo level.

Disclosure Committee

Responsible for determining the disclosure treatment of material information and identifying confidential and inside information for the purpose

of maintaining project lists compliant with the UK Market Abuse Regulations.

BOARD	Governance	EXECUTIVE
COMMITTEES	at M&S	COMMITTEE

SENIOR

LEADERSHIP

FORUMS

  SENIOR LEADERSHIP FORUMS

Underlying this governance feedback loop between the Board, its sub-committees and the ExCo, there are forums comprising senior management supporting each of these governing bodies.

Primarily, each of the Group's key business units have "Operating Review" meetings with streamlined memberships. Their main remit is management of key trading and operational matters, with decision-making delegated to them by the Group Delegation of Authority and underpinned by business unit Delegations of Authority.

Additional forums support on specific projects, business needs, or strategic priorities, meeting as and when required.

Examples include:

Property Committee

For reviewing and approving property investments.

Digital Board

For driving the Company's "Digital First" agenda across the Group.

Brand Forum

For reviewing use of the M&S brand, as well as considering use of third-party brands.

People Forum

For driving the people and culture agenda across the Group.

Fraud and Loss Committee

For pulling together all fraud related governance activities, reporting directly into the Audit Committee.

Compliance Monitoring Committee Oversight of credit broking activities within the Group, as regulated by the Financial Conduct Authority.

Plan A (Net Zero) Steering Group

For mobilising action across the business on our net zero roadmap, updating the ESG Committee on progress.

58 Marks and Spencer Group plc

BOARD COMPOSITION

AND MEETING ATTENDANCE

BOARD MEETING ATTENDANCE AND DIRECTOR RESPONSIBILITIES IN 2021/22

During the year, the Board held 12 scheduled	Sufficient time is provided, periodically,	For information on what the Board did
meetings for which individual attendance is	for the Chairman to meet privately with the	during the year, see p63-64.
set out below.	Senior Independent Director ("SID") and the
	non-executive directors to discuss any
	matters arising.

		Maximum		Linked to
CHAIRMAN	Attended	possible Independent	Responsibility in 2021/22	remuneration
Archie Norman*	12	12	Board governance and performance.
			Shareholder engagement.
* Considered independent on appointment.
EXECUTIVE DIRECTORS
Chief Executive	12	12	Group performance and management.
Steve Rowe			Executive Committee leadership.
Chief Financial Officer	12	12	Group financial performance, risk management and
Eoin Tonge			investor relations. Strategy and transformation planning.
NON-EXECUTIVE DIRECTORS			Role at Board meetings
Full Year			Independent non-executive directors assess, challenge and monitor the
Evelyn Bourke	12	12	executive directors' delivery of strategy within the risk and governance
structure agreed by the Board.
			As Board Committee members, directors also review the integrity of
Andrew Fisher	12	12
			the Company's financial information, consider ESG issues, recommend
Andy Halford	12	12	appropriate succession plans, monitor Board diversity and set the
			directors' remuneration.
Tamara Ingram	11*	12
Justin King	12	12
Sapna Sood	11**	12
Appointed in 2021/22
Fiona Dawson	11***	10

• Unable to attend one meeting due to participation in residential course on behalf of M&S.
• Unable to attend one meeting due to external board commitments.
• Attended 24 May meeting as an observer prior to appointment.

STANDING ATTENDEES			Responsibility
Nick Folland -	12	12	Advising the Board on all legal and corporate governance issues,
General Counsel & Company Secretary			including sustainability and Plan A.
EXECUTIVE COMMITTEE - ATTENDED BY INVITATION			Role at Board meetings
Sacha Berendji	4		The ExCo comprises the Company's senior leadership team below Board
			level and is tasked with running the day-to-day operations of the business
Katie Bickerstaffe	11
	and facilitating delivery of the strategy as approved by the Board.
			Members of the ExCo attend Board meetings by invitation to present
Paul Friston	5
	and discuss matters of strategic importance.
Stuart Machin	10		Direct reports to ExCo members also attend Board meetings by invitation
			as and when input is required on their specific areas of expertise.
Richard Price	5

Note: The tables above provide details of scheduled meetings held in the 2021/22 financial year.

GOVERNANCE

Monitoring non-executive director independence

The Board reviews the independence of its non-executive directors as part of its annual Board Effectiveness Review. The non-executive directors also meet annually, led by the SID, to conduct the Chairman's appraisal. The results of the meeting are then fed back

to the Chairman by the SID.

The Chairman was considered to be independent on appointment and is committed to ensuring that the Board comprises a majority of independent

non-executive directors who objectively challenge management, balanced against the need to ensure continuity on the Board.

The Company maintains clear records of the terms of service of the Chairman and non-executive directors to ensure that they continue to meet the requirements of the UK Corporate Governance Code.

Neither the Chairman nor any of the non-executive directors have exceeded the maximum nine-year recommended term of service set out in the Code, with the exception of our longest-servingnon-executive director,

Andy Halford. While Andy's tenure has now reached nine years, the Nomination Committee has reviewed and agreed he remains independent, and his role as SID

is an important constant while new executive Board members settle into their roles.

As such, the Board considers that all of its non-executive directors continue to demonstrate independence.

For information on the skills and experience of each director, see p60-62.For more information on director tenure see p67.

Annual Report & Financial Statements 2022

59

GOVERNANCE

OUR BOARD

This is our Board as it operated during the year. To see changes for the new financial year please see page 62.

1		2		3

4		5		6

1. Archie Norman Chairman	N
Appointed: September 2017	R

Career and external appointments: Archie is an experienced Chairman and former Chief Executive having led major transformation programmes at ITV, Lazard, Asda, Energis and Hobbycraft. He was previously Deputy Chairman of Coles Limited and was Lead Director at the Department for Business, Energy & Industrial Strategy from 2016-2020.Archie is also the Chairman of Signal AI, Non-ExecutiveVice Chairman of the Global Counsel and Senior Independent Director of Bridgepoint Group plc.

Committee Chairs
4. Andy Halford Senior Independent A
Non-Executive Director	N
Appointed: January 2013

Career and external appointments: Andy's strong finance background and broad knowledge of the UK and international consumer market was gained from CFO positions held in global listed companies. He is Chief Financial Officer of Standard Chartered, which he joined after 15 years

at Vodafone, nine of which were spent as Chief Financial Officer.

60 Marks and Spencer Group plc

2. Steve Rowe Chief Executive

Appointed: April 2016

Career and external appointments:

Steve joined M&S in 1989 and worked in senior roles across all areas of the business prior to his appointment as CEO, including Director of Home, Director of Retail, Director of Retail and E-commerce, Executive Director, Food, and Executive Director, General Merchandise.

Steve stepped down from the Board on 25 May 2022 and, with heartfelt thanks for his many years of dedication to the Company, will formally leave M&S at the AGM on 5 July 2022.

5. Andrew Fisher OBE	R
Independent Non-Executive Director	N
Appointed: December 2015

Career and external appointments:

Andrew was instrumental in establishing mobile lifestyle app Shazam, where he was Executive Chairman until October 2018, as a leading mobile consumer brand, and brings over

20 years' experience leading and growing numerous technology-focused enterprises. He is Non-Executive Chair of both Rightmove plc and Epidemic Sound, and is also a member of the UK Advisory Board for Spencer Stuart.

3. Eoin Tonge Group CFO & Chief Strategy Officer

Appointed: June 2020

Career and external appointments:

Eoin joined the business from Greencore, where he had been CFO since 2016. At Greencore, he oversaw the divestment of their US operations, strengthening the company's balance sheet, returning capital to shareholders and simplifying the business. Prior to that he was MD of Greencore's Grocery business and also worked in a variety of roles across strategy, finance, treasury and capital markets at Greencore and previously Goldman Sachs. Eoin became Group CFO & Chief Strategy Officer on 25 May 2022, taking on oversight of Plan A and playing an enhanced role in leading the future development of the business.

6. Tamara Ingram OBE	E
Independent Non-Executive Director	N
Appointed: June 2020	R

Career and external appointments: Tamara has a longstanding leadership career in advertising, marketing and digital communications, having held leadership roles at WPP since 2002 and as Non-ExecutiveChair of Wunderman Thompson. Prior to this, she worked at Saatchi and Saatchi where she held the roles of CEO and Chair. Tamara has led renowned marketing campaigns for household brands around the world and delivered cultural and business transformation at pace within her own businesses as well as on behalf of clients. She is also a non-executivedirector of Marsh MacLennan and Intertek Group.