Corporate Governance: Principles, Practices & Tesco Application

This report provides a comprehensive analysis of corporate governance principles and practices, with a specific focus on their application within Tesco. It defines corporate governance, identifies Tesco's governance structure, and assesses the governing body's role in directing and controlling the organization. The report distinguishes between the roles of management and the governing body, outlines how organizations can achieve good governance, and identifies relevant corporate governance codes. Furthermore, it explores the similarities and differences in various theories affecting corporate governance development and suggests ways to minimize conflicts of interest. Finally, the report identifies methods to develop transparency, accountability, and control within the organization's systems and processes, highlighting the importance of these elements for long-term success and ethical operations.

Unit 7 Corporate Governance
Principles and Practices

TABLE OF CONTENT
INTRODUCTION ..........................................................................................................................4
TASK -1...........................................................................................................................................4
1.1 Defining corporate governance..............................................................................................4
1.2 Identifying the general governance structure of the organization.........................................5
1.3 Assessing the role of governing body to direct and control the organization .......................6
1.4 Distinguish the roles of management and the governing body..............................................7
1.5 Describing how organization can achieve good governance.................................................8
TASK 2..........................................................................................................................................10
2.1 Identifying the different corporate governance codes to achieve good performance at
senior management level ...........................................................................................................10
2.2 Describe the similarities and differences of various theories affecting corporate governance
development ..............................................................................................................................11
2.3 Identify ways to minimize conflicts of interest....................................................................12
2.4 identifying how to develop a transparency accountability and control in the system and
processes of organisation. .........................................................................................................13
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15

INTRODUCTION
Corporate governance is very much important to manage work in the current era where
the business environment keeps of changing and there are lot of uncertainties in the business.
Also, present report is based on Tesco where role of its governing body and certain principles of
corporate governance followed at the workplace are discussed in detail. Moreover, the study will
also explain how organizations would achieve good governance in coming years. Furthermore,
identification of various governance codes to achieve good performance will at senior level will
also be explained. Also, similarities and differences of various theories that affect the governance
will also be identified. Lastly, in this report certain methods will be identified that would develop
transparency, accountability and direction in conducting various processes of the organization.
TASK -1
1.1 Defining corporate governance.
It is the system through which the companies are guided and controlled so that all
operations are conducted in well-defined manner. Also, in company shareholders role is to
properly appoint directors that will help in establishing proper governance within the workplace
so that people are able to carry out the work smoothly and interest of all other parties is
maintained.1 Moreover, in context of Tesco it can be said that company make sure that proper
corporate governance is established so that there are no legal problems in the future.
Furthermore, there are 4 P in this concept that are followed such as people, process, performance
and purpose. Thus, through strictly following all these 4 p the quoted firm is able to create better
market opportunities for the future growth. Also, through adopting good corporate governance
quoted firm has been able to build trust with potential and current investors and the community.
Also, Tesco has been able to deliver the long term success and economic growth because
bests of interest of everyone is maintained. 2Moreover, through good corporate governance
1 Ali, M. A., Hazem Ramadan Ismael, and Ahmed H. Ahmed. "Equity incentives,
earnings management and corporate governance: Empirical evidence using UK panel
data." Corporate Ownership & Control 17. no. 2 (2020): 104-123.
2 Kolev, Kalin D., David B. Wangrow, Vincent L. Barker III, and Donald J. Schepker.
"Board committees in corporate governance: a cross‐disciplinary review and agenda for
the future." Journal of Management Studies 56. no. 6 (2019): 1138-1193.

Tesco has been able to minimize the wastage that would otherwise would be caused if the
management was not proper and working was not appropriate. Furthermore, maximum revenues
are also results of setting proper roles and responsibilities for every individual that is working
hard to achieve the goals of the business.
Furthermore corruption, risk and management is also reduced if management acts
responsible in overviewing all the activities in responsible manner. Moreover, in Tesco corporate
governance helps the firm in devising the long term group strategy and ensures sustainable
growth over the years3. Also, through best policies Tesco has been able to create equal
opportunities and diversity within the workplace that also help in building better brand image in
eyes of other people and investors for the business.
1.2 Identifying the general governance structure of the organization
Various corporations have different organizational structures but the most typical one
consists of shareholders, board of directors, employees and officers. Also, in context of Tesco it
can be said that board of directors is responsibility for setting all the general policies for the
overall working of the firm to meet certain short and long term goals4. Moreover, staff board
decided what are the future objectives that need to be achieved and for large organizations like
Tesco the models of the firms keeps on changing from time to time.
Furthermore, governance structure of Tesco also consist of employees within the
workplace that are responsible for ensuring that work is carried out in right manner and all the
policies that are developed by the top management are followed in correct manner. Also, these
are the ones that are responsible for building the goodwill of the firm through there continuous
efforts and hard work 5. Also, the officers of the company establishes the corporate governance
through monitoring that all activities are undertaken at the right place and time and also ensures
3 Gerged, Ali Meftah. "Factors affecting corporate environmental disclosure in emerging
markets: The role of corporate governance structures." Business Strategy and the
Environment 30. no. 1 (2021): 609-629.
4 Kyere, Martin, and Marcel Ausloos. "Corporate governance and firms financial
performance in the United Kingdom." International Journal of Finance &
Economics 26. no. 2 (2021): 1871-1885.
5 Abdou, Hussein A. and et.al., "Corporate governance and earnings management nexus:
Evidence from the UK and Egypt using neural networks." International Journal of
Finance & Economics 26, no. 4 (2021): 6281-6311.

that there is no wastage of resources. Furthermore, they also look out that all the projects are in
check and are done according to the plan. Also, the general governance structure of the Tesco
company ensures that framework followed is logical and reasonable and there is much clarity
and transparency in the working of business. Moreover, Tesco ensures that its structure is made
up in such manner that efficiency of the project is not impacted and project is able to run
smoothly as possible . Also, the structure of the Tesco includes the project owner, manager, team
leaders, stakeholders and steering committee.
Moreover, general structure of governance in Tesco is responsible for taking care of all
the activities that makes business successful in the long run. Thus, it can be said that this general
structure of Tesco has allowed the business to have better view of the progress and improve trust
and reliability in the business at each level of the management. Furthermore, there are fewer
bottlenecks and the decision-making is also factor so that success of the firm is ensured.
1.3 Assessing the role of governing body to direct and control the organization
The governing body is defined as the group of people which are given with the power and
authority in order to make the policy and procedures in order to have overall direction of an
organization. This body is basically made and implements the decision on behalf of the members
and organization. The role of the governing body is to have the good management with the
organization, making and monitoring the mission of the organization, direction, porpoise,
strategies and priorities which are within the boundaries of the constitution and legal obligations.
The key roles of the governing body in order to have direct and control the organization are as
follows:
1. The primary role of the governing of Tesco is to protect the rights, interest and the
well- being of the members. By raking care of the members will help them to
have direct and control the organization.
2. The governing body is the main body which helps the organization in order to
attain the objectives of the company. This will help the organization to have the
smooth flow by achieving the goals and objectives.
3. The governing body of the cited organization must make sure that all the
members in the company should participate in the decision- making in order to
make the vision of the organization.

4. They must set the overall direction for the members of the company, making the
purpose and setting the future strategies on order to achieve the goals and ethics
of the company.
5. By making the policies they must develop the made policies and the governance
arrangements, interact with the managers and have collaborations with the public
and with stakeholders as well.
6. The governing body of the organization must direct and control the organization
by monitoring that the organization is accountable, legal and financially stable as
well.
1.4 Distinguish the roles of management and the governing body
Management team of the company is appointed to keep eye on the daily routine business
operations and activities. The management of the firm plays a vital role for the success of
business as they manage employees and workers and also implement the strategic vision of
the firm. While on the other hand, governing body is responsible to determine the policies
and mission strategy of the company. A good governance is responsible to administer the
management and functioning of the firm.
 The management team of the Tesco plc doesn't responsible to set any policy and rules for
the company. While on the other side, the governing body formulate and set the right
policy for company in order to make sure that employees can work effectively and
defined manner 6.
 Management of the firm is bound to act according to the governance instructions and
have to follow all the rules and regulation made by them 7. For example- Tesco plc
management team have to follow strictly all the rules and regulation made by governing
body to run business smoothly. Whereas, governing body itself act as a higher authority
and known as the board of the company.
6 Khan, Mozaffar. "Corporate governance, ESG, and stock returns around the
world." Financial Analysts Journal 75. no. 4 (2019): 103-123.
7 Sarhan, Ahmed A.and et.al., "Board diversity, corporate governance, corporate
performance, and executive pay." International Journal of Finance & Economics24, no.
2 (2019): 761-786.

 Management team of the company is responsible to appoint skilled staff members and
leaders and managers for the success of business. For example- management team such
as HR professionals of Tesco plc appoints skilled employees having experience and good
knowledge. Conversely, governance is responsible to appoint top-level executive and
overseas the management team of the firm. For example- governing body appoint top
managers who make most of the important decisions for the company and oversees those
decisions and overall management with them.
1.5 Describing how organization can achieve good governance.
A good governance play a vital role in the company as can create positive and healthy
environment of working . Tesco plc focus on achieving good governance by balancing board
composition as it provides the necessary responsibilities and follows all the laws and regulation
in order to provide value to people 8. The demand for good governance is growing nowadays in
emerging market countries so that it can help firms and financial institutions improve their
financial performance in the competitive world. It is also essential to manage risk proactively in
order to achieve good governance.
Discipline- it is important to have discipline in the company, so good governance must
ensure that all senior management are maintaining discipline at workplace and keep an eye on
employees whether they are following procedures or not.
Accountability- the management team and HR professionals of the firm must ensure that
they will manage workforce in such a way that it can easily attract accountability and
transparency and follow legal systems
It is essential that all the employees feel they are involved in the company's decisions. In order to
develop their well-being Tesco plc management team and higher authority must encourage
everyone to treat equally and with fairness in order to create long term value.
Participation- It requires that all the staff members have direct or representative access to
government systems especially those most vulnerable. Every employee should be afforded a
voice in important decision-making process of the company. By having this, managers can create
8 Jacoby, Gady, and et.al., "Corporate governance, external control, and environmental
information transparency: Evidence from emerging markets." Journal of International
Financial Markets, Institutions and Money 58 (2019): 269-283.

strong society with freedom of expression. Hence, This can create diversity in the working
environment.

TASK 2
2.1 Identifying the different corporate governance codes to achieve good performance at senior
management level
The good corporate governance is the main responsibility of the every organization which
includes both the hard and soft laws which are made by the legal authorities. The corporate
governance codes are the codes which are incorporated in the United Kingdom and listed on the
London Stock Exchange. The main reason behind the corporate governance codes is to define
the shareholders and the stakeholders that how the organization applies the principles of code.
The different governance code is as described below:
1. Leadership: This code requires that the companies must ensure to their
stakeholders that they have the effective board of directors that are able to provide
the excellence in the leadership. The strong leadership requires that the cited
organization must have the clear division of the responsibilities among the
executives and board of directors.
2. Accountability: The board of directors is accountable for the overall actions and
decisions of the company 9. The directors of Tesco must disclose the annual
disclosers to the shareholders of the company in order to represent the fair and
accurate corporate look.
3. Remuneration: The UK used to favour the remuneration packages that are used to
design and promote the long- term success which are aligned with the
performance10. The cited organization must have the formal and transparent
process of making the remuneration policies and setting the remuneration
packages.
9 Karim, Atm Enayet, Khaldoon Albitar, and Mahmoud Elmarzouky. "A novel measure
of corporate carbon emission disclosure, the effect of capital expenditures and corporate
governance." Journal of Environmental Management 290 (2021): 112581.
10 Li, Hezun, Siri Terjesen, and Timurs Umans. "Corporate governance in entrepreneurial
firms: A systematic review and research agenda." Small Business Economics 54. no. 1
(2020): 43-74.

2.2 Describe the similarities and differences of various theories affecting corporate governance
development
Corporate governance development is the framework which helps the organization in
order to set the rules, controls the policies and make the good resolutions to have corporate
behaviour. This will help the cited organization to have the good direction and business integrity.
There are various theories which used to affect the corporate governance development which are
as described below:
1. Agency theory: This theory was developed by in the early 70s American literature
which sued to describe the relationships gained between the owners and directors
of the organization11. In this theory the shareholders of the organization are
expecting from the Board of directors in order to lead and make the best decision
of their interest. As the directors cannot make the decision in interest of them
only. This theory needs to have harmonization of the interest of the managers with
the shareholders in order to maximize the company value.
2. Hazard Moral Theory: This theory is central with the Agency theory and it is also
known as the hidden actions or the behaviour of the managers. The hidden actions
are caused due to the consequences of the asymmetric information which are held
by the counterparties. This theory is basically related with the remuneration
manager policy.
The similarity between the both the theory is that these both are related with the directors and
mangers of the company.
The difference between both the theory is that the moral theory used to involve the information
that has been given by the company when entering in company12. On the other hand in the
agency theory the shareholders of the organization are expecting from the Board of directors in
order to lead and make the best decision of their interest.
11 Feist, Alison, Ryan Plummer, and Julia Baird. "The inner-workings of collaboration in
environmental management and governance: A systematic mapping
review." Environmental Management 66. no. 5 (2020): 801-815.
12 Wayant, Cole, Erick Turner, Chase Meyer, Philip Sinnett, and Matt Vassar. "Financial
conflicts of interest among oncologist authors of reports of clinical drug trials." JAMA
oncology 4, no. 10 (2018): 1426-1428.

2.3 Identify ways to minimize conflicts of interest
There are various types of steps to deal with conflicts of interest and must needs to be
taken into consideration by company.
 Maintain effective process- It is important to establish a systematic process which is the
most effective way to manage a conflict of interest 13. In this process, it is important to
decided how conflict should be handled and who should be involved while dealing with
situation.
 Training- While dealing with conflicts, it is an essential to provide proper trainings
sessions to all the staff from top to bottom, in which directors have the great opportunity
to become familiar with the terms and conditions and create positive environment so that
everyone learn how to deal with conflicts and run through some difficult situations.
 The management team and higher authority of Tesco plc must focus on active listening
skills to understand the concern of others. Listen to what the people are saying instead of
getting ready to react instant.
 It is essential to ask the other person about their concern and try to solve them. The best
way to deal with conflicts the company should provide employees with professional
development opportunities from which they can increase knowledge on ethical issues.
 Governing body and company should create extensive procedures and guidelines for
employees related to conflicts of interest. Not only employees, but company should
consider making it available to all potential customer as well.
 It is mandatory to spread awareness about roles and responsibilities of people. The
company needs to review all legally binding agreements related to minimize conflict of
interest.
13 Kronsell, Annica, and Dalia Mukhtar-Landgren. "Experimental governance: The role of
municipalities in urban living labs." European planning studies 26, no. 5 (2018): 988-
1007.