Looking at Corporate Governance in TESCO Plc

Corporate governance basically is a kind of concept that has been described with thousands of definitions because of its relations to economic positions of the companies.The most basic ones that can be conceptualised are as

Corporate governance is a system that regulates efficiency in management of business companies involving of certain codes of practice,contracts and legislations.

‘Corporate Governance are the policies, procedures and rules governing the relationships between the shareholders, (stakeholders), directors and management of a company, as defined by the applicable laws, the corporate charter, the company’s bylaws, and formal policies’.

ZAWAIDEH, M. (2003).Definition of Corporate Governance [WEBSITE].AVAILABLE FROM: https://www.xing.com/net/balancedscorecard/2-insights-4642/definition-corporate-governance-1813244/

[ACCESSED:8 NOV 2009].

Corporate Governance in TESCO Plc.

Corporate governance of a company encompassing with high defined values and plans i.e efficient discharge of board responsibilities towards the interest of shareholders can produce good performance.if the basic principles or codes of practice of corporate governance is not followed may lead to deterioration in the economic and financial performance of a company.

Corporate governance under Combined code in TESCO plc. can be summarised by dividing into sub-categories.

Effective board

Chairman and executive having their own responsibilities

Balance and Independence of directors

Appointments of directors

Committees

Nomination committee

Audit Committee

Renumeration Committee

Board performance evaluation

Risk management and Internal Controls

Effective board of any company forms the backbone towards good performance and stability of company. Consistent growth and success of Tesco plc. during recent years shows that company has potentially qualified and highly experienced board of directors.Moreover taking consideration into Tesco plc. annual report it is also clearly visible that board of directors are aware of goals and objectives related with the company.

Northcote Internet Pvt Ltd(NO DATE).Tesco Plc. [WEBSITE].AVAILABLE FROM. http://www.northcote.co.uk/company_links/by_sector.asp?SIT=1&SID=12&SDL=NI02770. [ACCESSED:9 nov 2009].

Chairman and chief executive officer form as two main pillars of the company. Vital activities necessary in smooth progress of the company depends on the shoulders of chairman and chief executive officers. Company having, chairman and chief executive officers, distributed responsibilities and accountabilities fall under provisions of good governance. Considering Tesco plc. set of responsibilities and duties for chairman(Sir David Reid) and chief executive officer(Sir Terry Leahy) are very well distributed therefore avoiding any way of decisions to be taken by a single person.The shareprice of the company is also maintaining good consistency ,because of trustworthy relations between shareholders and chairman.

Morningstar (NO DATE) Tesco Impresses with First Half Results (Management and stewardship). [WEBSITE].AVAILABLE FROM: http://www.morningstar.co.uk/uk/news/article.aspx?lang=en-GB&articleid=82979&categoryid=660 [ACCESSED:9 NOV 2009].

Balance between the directors in the board is one key point in maintaining the stability and financial progress of the company. if the balance between the board of directors in a company is not present, the company cannot flourish unanimously. Taking consideration into tesco plc,the company has 15 members in the board where eight are executive directors and seven are non-executive directors. According to combined code atleast half of the board should be comprised of directors that are independent and there should be balance, whereas in case of Tesco plc balance between board of directors is not attained,this also raises the question of independence among the directors.

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Appointment of board for a company is another essential footstep that has to be followed on a regular basis in order to maintain the standard of required skills and experience. Generally the election in a company is held annually, which is the best way of practising and complying with combined code. In accordance with Tesco plc the election of board is held every three years,which is not very well regulated.

Morningstar (NO DATE) Tesco Impresses with First Half Results (Management and stewardship). [WEBSITE].AVAILABLE FROM: http://www.morningstar.co.uk/uk/news/article.aspx?lang=en-GB&articleid=82979&categoryid=660 [ACCESSED:10 NOV 2009].

The Committee structure provides company to perform in parts and give out united results by concentrating on key areas.cosidering Tesco plc. ,it is divided into three important committees namely

Nominations Committee

Remumeration Committee

Audit Committee

Nomination committee

The Committee’s purpose is to mould the approach of TESCO to concerns of corporate governance and, from time to time, to review such approach and make recommendations to the Board of TESCO in respect of such matters. In addition, the Committee shall advise the Board on corporate governance and related matters.the committee is chaired by David Reid.as it can be percieved re-election in tesco happens to be every three year so nomination process needs to be improved ,may be it can be reduced to one year process which can explore new talents and experiences

Audit committee

The Committee’s purpose is to represent and assist the Board of Directors with oversight of the integrity of TESCO’s accounting and financial reporting processes (including related internal controls) and the audits of the financial statements of TESCO. Management is responsible for the TESCO’s accounting and financial reporting processes. The external auditors are responsible for the audit within accepted auditing standards of TESCO’s accounting and reporting process and reporting the results of that audit to the Committee.

Tesco Corporation(2008).Audit committee charter.

[WEBSITE].AVAILABLE FROM: http://www.tescocorp.com/data/1/rec_docs/523_Tesco%20Audit%20Committee%20Charter%2007-05-18.pdf [ACCESSED ON:11 nov 2009]

Remuneration Committee

Remuneration committee is basically designed for remuneration of directors,employees or staff in a proper and efficient way.In a statement, Tesco said: “Remuneration for the main board reflects the highly competitive environment in retail and the need to recruit and retain the best people.An independent remuneration committee approves rewards, linking them to challenging long-term performance targets. If these targets are not met, the rewards diminish.”

Breakingnews.ie(2003).Tesco chief gets 15% pay and benefits boost. [WEBSITE].AVAILABLE FROM: http://www.breakingnews.ie/archives/2003/0511/business/snidojeykf/ [ACCESSED ON:11 NOV 2009]