Stuart Rose

Dear Shareholder

I am pleased to present the report of the Nomination Committee for the 52 weeks ended 2 December 2018.

During the year, the Nomination Committee has undertaken a number of activities, the results of which led to the appointment of Julie Southern with effect from 1 September 2018. This followed the earlier appointment of Luke Jensen to the Board as an Executive Director from 1 March 2018, as announced in last year's report. While reviewing the composition of the Board it was noted that a number of Directors were approaching or had exceeded six years on the Board and as such further changes to the Board are likely in the medium term.

During the year, the Committee undertook a thorough review of the Board's composition, succession plans and its diversity policy.

More information about the work of the Committee during the year can be found below.

I will be available at the AGM to answer any questions about the work of the Nomination Committee.

Lord Rose
Nomination Committee Chairman
5 February 2019

During the year, the Committee undertook a thorough review of the Board's composition, succession plans and its diversity policy.

Lord Rose
Chairman

Membership and Meetings

The membership and attendance ofthe Nomination Committee, together with the appointment dates, are set out below:

Lord Rose

Chairman


Nomination Committee member since 11 March 2013

3/3

Jörn Rausing

 


Nomination Committee member since 9 March 2010

3/3

Ruth Anderson

 


Nomination Committee member since 9 March 2010

3/3

Douglas McCallum


Nomination Committee member since 3 October 2011

3/3

Andrew Harrison


Nomination Committee member since 1 March 2016

3/3

Emma Lloyd


Nomination Committee member since 1 December 2016

3/3

Julie Southern


Nomination Committee member since 1 September 2018

1/1

Actual meetings attended

Possible meetings the Director could have attended

As required under the terms of reference, the Nomination Committee has seven members, all of whom are independent Non-Executive Directors, and holds a minimum of two meetings a year. Julie Southern became a member of the Nomination Committee on her appointment to the Board on 1 September 2018. The biography of each member of the Nomination Committee is set out in Directors' biographies. Other attendees at Committee meetings include the Chief Executive Officer and the People Director. The Deputy Company Secretary is the secretary to the Committee.

How the Committee Spent its Time in 2018

The Nomination Committee undertook a number of activities during the period as described below.

Board Composition and Succession Planning

The Committee seeks to ensure that the Board's composition, and that of its committees, is appropriate to discharge its duties effectively. During the prior year the Nomination Committee undertook a thorough review of the Board's composition. This review they took into account various considerations including tenure of Director, independence, diversity and ensuring a balance of Board knowledge, experience and skills. This review preceded the Board agreeing changes to the composition of the Board over the last 12 months. The Company separately announced the appointment of Luke Jensen as Executive Director with effect from 1 March 2018 and the appointment of Julie Southern as Non-Executive Director with effect from 1 September 2018. More information about the Board's composition, independence and effectiveness can be found in the Corporate Governance Statement.

The Nomination Committee continues to review Board composition to ensure that there is effective succession planning at Board level. This includes the review of a regularly updated skills matrix for all Directors. Based on the skill set analysis, the Board expects to meet in early 2019 to identify and agree some objectives and timing for planned changes to the Board. It is likely the Board will make a number of Non-Executive Director appointments in the medium term, both to prepare the Board for the departure of retiring Directors and to identify candidates meeting the required skill sets. The Company has not yet appointed a Senior Independent Director following the resignation of Alex Mahon, and this is part of the succession planning discussions currently being had by the Committee.

In addition to reviewing Board composition, the Nomination Committee oversees the process of succession and management development for the Executive Directors and the next layer of management, the Management Committee. With regard to the development of the management team, two senior managers regularly attend the Board meetings to report on their respective business areas, while the Board has exposure to other senior managers who present or report to the Board on their business areas or particular projects. The Nomination Committee is mindful that it could improve the extent of its exposure to the senior management and plans to expand on existing arrangements for building relationships between Non-Executive Directors and senior management outside of formal Board meetings.

Board Diversity

The Nomination Committee recognises the importance of diversity and inclusion both in the boardroom and throughout the organisation and understands that a diverse board will offer wider perspectives which lead to better decision-making, enabling it to meet its responsibilities.

The Board's diversity policy, which was reviewed in the year, considers a broad range of characteristics when considering diversity including age, disability, social and educational background, as well as gender and ethnicity. This policy includes a commitment to having a one-third female Board representation by the end of 2020 and a minimum of one non-white Board director by the end of 2021 and to including diversity principles in the recruitment process at both Board and senior management level. At the end of the period, the Board had 25% female representation, which fell from 27% last year due to the appointment of Luke Jensen as an Executive Director. Improvements were seen at the management committee level with female representation also rising from 13% to 33%. We will report progress against the policy in future years. The Board is committed not only to increasing the percentage of women and ethnically diverse individuals on the Board, but also in senior positions in the Company and recognises that there is further work to be done to achieve that. The Board is committed to supporting workforce initiatives that promote a culture of inclusion and diversity.

Any future Board appointments will continue to be based on objective criteria to ensure that the best individuals are appointed for the role. Wherever possible, the search pool will be widened and where executive search firms are used, Ocado will only engage with those firms that have adopted the "Voluntary Code of Conduct for Executive Search Firms". This includes Russell Reynolds, who were engaged to help the Company secure new Non-Executive Directors for the Group. The Nomination Committee monitors these objectives and will evaluate the balance of skills, experience, knowledge and diversity on the Board.

For more information on diversity in respect of all the Group's employees, see the Our People section. The diversity chart illustrates the diversity of the Board in terms of gender as at the period end on 2 December 2018.

Annual Review

In addition to its annual performance evaluation, discussed in the Corporate Governance Statement, the Nomination Committee carried out a review of its Terms of Reference during the period. The Nomination Committee is mindful that the 2018 Code expands its remit in relation to succession planning and a diverse pipeline and has updated its Terms of Reference accordingly to address these issues in the coming year. The Committee's Terms of Reference can be found on www.ocadogroup.com.