(7029EFA) - Governance Accountability & Ethics

STUDENT ID: 13381503
GOVERNANCE ACCOUNTABILITY & ETHICS
7029-EFA

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PART A
Board experience
John Allan CBE, independent non-executive chairman since 2015. He has
immense experience in retail and logistics. Previously, he has held the positions
of chairman of Dixon retail Plc and CEO of Excel Plc.
Ken Murphy has been the CEO since 2020. Before that, he spent more than
20 years in several senior management positions with Walgreens Boots
Alliance.
Research shows that with an experienced CEO, a firm is more likely to have a
risk-taking propensity and an increased pursuit for entrepreneurial activities;
(Simsek, 2007)
Board Composition
The corporate responsibility, nominating, and remuneration committees make
up the board committee of Tesco. (Tesco PLC, n.d.)
The chairman of the board, who is appointed independently, is one of the 13
members of the board. Out of the 13, 10 are non-executive independent
directors and 2 are executives.
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Research shows that the representation of independent directors on the board
shows a positive relation to the firm’s performance and better governance.
(Fuzi et al., 2016)
Moreover, board independence is seen as a powerful instrument for
monitoring the performance of managers and preventing opportunistic
actions. (Fama & Jensen, 1983)
Board leadership & company purpose
Tesco Plc's Board of Directors is ultimately responsible for establishing the
Company's purpose, values, and strategy to deliver long-term sustainable
success and generate value for shareholders and other stakeholders while
remaining aligned with company culture. (Annual Report 2022, n.d.)
To that end, the Board conducted a strategic review of the Company's current
direction, future priorities, and performance framework.
Stakeholder engagement
Customers, suppliers, colleagues, and shareholders are among the key
stakeholders with whom Tesco interacts.
When making decisions during board meetings, the Board takes the time to
hear and understand the opinions of its important stakeholders, including the
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interests and views of the communities in which the company operates, Tesco
pensioners, NGO's, and regulators. (Annual Report 2022, n.d.)
The Board uses customer engagement surveys and data analysis to listen to
customer feedback and act on what is most important to provide the best
products and services possible.
According to research, effective stakeholder engagement benefits the firm by
improving efficiency and lowering transaction costs (Herremans et al., 2016),
as well as contributing to a firm's sustainable innovation. Ayuso and colleagues
(2011)
Culture
Tesco has a top-down culture, with the Board and senior management setting
the tone and leading by example. (Annual Report 2022, n.d.)
Tesco's values ensure that everyone knows what is most important to the
company. Tesco has the potential to make a significant impact on issues that
are important to customers, colleagues, communities, and society. (Tesco,
2022)
Researchers discovered that a top-down approach to change management was
more effective than a participative approach in a study published in the Journal
of Organizational Behaviour (Mathieu & Taylor, 2006). According to the study,
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"top-down approaches are more likely to result in the successful
implementation of change initiatives."
DIVISION OF RESPONSIBILITY
The Board has a clear division of responsibilities between running the Board
and running the Group's business. The Chairman, Group Chief Executive,
Senior Independent Director, and independent Non-executive Director each
have their own role statement. (Annual Report 2022, n.d.)
According to research (Brickley et al., 1997), it is better to split the titles of CEO
and Chairman than to combine them because firms with split titles outperform
firms with combined titles, albeit at a cost that includes agency and
information costs.
COMPOSITION, SUCCESSION AND EVALUATION
Non-executive Directors are appointed on merit, against objective criteria and
are initially appointed for a three-year term with an expectation that they will
continue for at least a further three years.
Directors are nominated by the Nominations and Governance Committee and
are subsequently approved by the Board for election or re-election annually by
shareholders at AGM (Annual Report 2022, n.d.)
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Lygon Group assisted the Committee in its search for new Directors as part of
its succession planning, setting rigorous selection criteria and developing
detailed role profiles. Lygon Group has no connection with Tesco or any of its
directors. (Annual Report 2022, n.d.)
Succession- The abilities and expertise that each Director offers to the Board
are taken into account by the Board when deciding whether to re-elect them.
No Director participates in the conversation about their own re-election.
According to research, businesses with relay successions experience lower
volatility, stronger long-term stock returns, and better post-turnover
accounting performance. (Tao & Zhao, 2019)
Diversity: As of 2021, 31% of the board members are women, and 15% are
members of racial or ethnic minorities. Tesco sets new goals for the future,
including having 36% female global executives and 18% from ethnically diverse
backgrounds by 2025. (Annual Report 2022, n.d.)
Additionally, the Board backs the suggestions made in the Parker Review on
ethnic diversity (Parker et al., 2022) and the recently released FTSE Women
Leaders Review. FTSE (2022)
Nomination committee: Each year, the Nomination Committee formally
evaluates the non-executive directors' independence. The Committee also
7029-EFA GOVERNANCE ACCOUNTABILITY & ETHICS ID-13381503