Analysis of Corporate Governance Arrangements at Tesco Plc

This report provides a critical appraisal of the corporate governance arrangements of Tesco Plc, a British multinational retailer. It begins with an introduction to Tesco, its structure, and its corporate governance principles. The report then delves into the various committees within Tesco, including the Audit, Remuneration, Corporate Responsibility, Nominations, and Disclosures Committees, outlining their functions and responsibilities. It highlights the issues faced by Tesco directors regarding accounting scandals and financial manipulation, specifically mentioning the trials faced by former directors. The report identifies areas for improvement, such as strengthening the linkage between management, the board, and shareholders, as well as avoiding manipulation of financial data and improving transparency in financial reporting. It proposes a new governance structure focused on the company's vision, consumer needs, and effective risk management. The role of leaders and the finance function in corporate governance is also analyzed, emphasizing the importance of judgment, collaboration, integrity, and transparency. The report concludes by emphasizing the need for regular self-evaluations and the use of outside consultants to identify and mitigate problems, ultimately aiming to enhance Tesco's corporate governance structure.

Critically Appraising the Corporate
Governance Arrangements of
Tesco Plc

Introduction to Tesco Plc
 Tesco is a British multinational that sells groceries and general merchandise
 Founded 100 years ago in 1919
 Welwyn Garden City, Hertfordshire in England is the headquarter location
 Approximately 6,800 stores across the United Kingdom, Ireland, Hungary, Poland and few other
abroad locations
 Distribution of service in different formats, such as supermarket, hypermarket, convenience shop
and superstore
(Tescoplc.com 2019)

Introduction to the corporate
governance arrangements of Tesco
PlcBelow are the principles of corporate governance of Tesco (Tescoplc.com 2019):
 Shareholders are allowed to give their opinions to reducing the business hassle for the
company
 The management is responsible for delivering benefits to its stakeholders as well as
maintaining the ethical acts of the business
 Consistent delivery of high quality financial reporting, so that, investors have appropriate
knowledge of entire business related thing and that more resources are allocated as per the
business requirement

Introduction Continues…
 Tesco Plc currently has five
different committees to
support its vision
 These are Corporate
Responsibility,
Remuneration, Audit,
Disclosures and
Nominations (Tescoplc.com
2019)

Continues…
THE AUDIT COMMITTEE:
 Financial experts are hired for an extended support on the company’s business environment
 The results of shareholder's’ voting decide the appointment of external auditors
 Focus on adherence report to remain compliant with the UK Government Code
 Personnel in the committee are trained constantly to keep them updated with the matters of
accountancy and finance

Continues…
THE REMUNERATION COMMITTEE:
 In the annual reports, share scheme payments to be given to management are covered in disclosures
 There are "Clawback" provisions, which discourage management from focusing on short-term success
 Any disinterest between management and the committee is fought with the use of external consultants
and counsels
 Compensation to management and shareholders in business circumstances of irrespective kinds is also
a part of management philosophies

Continues…
THE CORPORATE RESPONSIBILITY COMMITTEE:
 Consistent updates on ethical actions and its implications are maintained for an entire
fiscal year
 Providing updates on sustainable business model and others to the investors and
consumers
 Maintaining strong communication channels to keep the shareholders updated on
sustainable practices

Continues…
THE NOMINATIONS COMMITTEE:
 To ensure the presence of independent members to keep the shareholder interests
always highlighted
 Creating a link between management performance and compensation through regular
appraisals programs

Continues…
THE DISCLOSURES COMMITTEE:
 Help to facilitate effective risk management basis on the information generated within
the company’s premise
 Presenting financial statements in a way it is comparable for over periods of time and
that it gains the confidence of investors

Issues concerning the corporate
governance arrangements
 Tesco directors have faced on so many instances a front trial
 It happened when former Tesco’s directors, such as Christopher Bush,
John Scouler and Carl Rogberg faced trials over accounting scandal
(Telegraph.co.uk 2019)
 Manipulation with accounting information has been highlighted on
several instances for Tesco
 Having said that the Audit Committee and the Disclosures Committee
of Tesco follow few principles to ensure that correct financial data are
made available throughout its financial year, it fails to do so
 The incidents of Tesco directors facing a front trial indicate the same

Areas of improvement
Basis on the findings of the discussion, it can be said that below areas
should be corrected to practice a robust governance of business and
financial management:
 A clear linkage between management, the board and shareholders is
required
 Manipulation of financial data should be avoided
 The Disclosures Committee needs to maintain the consistency in
updating of financial statements
 The role of leaders and finance functions would also be of high
importance

The proposed governance structure
The government structure of Tesco Plc should consider a few changes to
it to make it more productive in terms of avoiding accounting scandals.
The structure should also have the below recommended features:
 There is a need to stay focused on the company’ vision
 The consumer needs should always be met
 Effective strategic risk management should also be there