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Corporate Governance Leadership And Motivation Of Tesco Plc Business Essay

Info: 3837 words (15 pages) Essay
Published: 1st Jan 2015 in Business

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In this paper, we are trying to explore the concept of corporate governance in a holistic context. This research analyses the UK model of corporate governance and the role of codes of practice. Afterwards, the paper is exploring the importance of leadership and motivation in enhancing the groups and team performance in an organisation.

In the end, we can say that corporate governance is necessary to set rules and regulation of an organisation. Good corporate governance provides the incentives to protect the interests of the company and shareholders, to monitor the value creation and efficient use of resources to provide transparency of information. Later, the paper has evaluated the leadership practices at Tesco PLC for motivating the employees and enhancing the group and team performance. Motivation is a key to success, as employee is the vital resource which should be utilized in a proper way to get outstanding results. Leadership is the important aspect who can utilize this vital resource through motivation and proper guidance. 17

References 18


Jack cohen started his business in 1919 and it was a market stall which was in London East end and Hackney. Before 1924 he also operated wholesale business. Then he named business Tesco in 1924. Tesco opened two stores in Becontree and Burnt Oak in 1931. From 1939 business expended further. In 1947 Tesco entered in the stock exchange as a Tesco store Limited. In 1950 to 1960 Tesco grew fast. In 1987 Tesco was taken over Hillards. Teso started loyalty card in 199, afterwards Tesco lunched online shoping service .In 2003 Tesco joint venture with 02 and started Tesco. Tesco UK store are divided six part such as:(Tesco 2012)

Tesco extra

Tesco super store

Tesco metro

Tesco express

One stop

Tesco home plus(Tesco 2012)

In the first half of 2011 Tesco made £1.9 billion profit. Tesco also Britain biggest private sector where 30,000 working in this county.(Tesco 2012)

Leadership style of Terry Leahy

Terry Leahy Born 28 February 1956 Liverpool, UK and he obtained BSC(HONS)degree Management science in 1977. He applied several job but unsuccessful. He applied to Tesco again and got this job. In 1997 become CEO of Tecco this was third biggest retailer in the world according by revenues. In this time he was implementing the Tesco club card loyality pogram. Leahy contuned visited Tesco stores specially in the weekend. With Leahy direction Tesco announced £2 billion profit in April 2005.(The economist 2002)

Aim and Objective

Corporate governance of Tesco

The leadership style of sir Terry Leahy

Investigatin and evaluating ‘Corporate Governance ‘ and Leadership circumstances

The Organisation for Economic Cooperation and Development (OECD) issued in May 1999 and revised in 2004 its “Principles of Corporate Governance” in which are the basic ideas that shape the concept that is used by member countries and some others in the process of becoming. The OECD principles provide that the QA framework must:

Protect the rights of shareholders.

Ensure equitable treatment for all shareholders, including minority and foreign.

All shareholders should have the opportunity to obtain effective reparation of damages for the violation of their rights.

Recognize the rights of third parties and to promote active cooperation between them and the societies in creating wealth, generating jobs and businesses achieve financial sustainable.

Ensure there is a proper and timely disclosure of all relevant matters of the company, including financial situation, performance, shareholding and management.

Ensure the strategic guidance of the company, effective monitoring of the management team by the board of directors and the responsibilities of the Board of Directors and its shareholders (Arcot 2005, 11).

Leadership motivation: Motivation is a characteristic that helps a person achieve his or her objectives. To maintain level of commitment and effort, organizations need to adequately assess the cooperation of its members, establishing mechanisms to have a workforce sufficiently motivated to perform efficiently and effectively, leading to the achievement of the objectives and goals of the organization and at the same time achieve the expectations and aspirations of its members.

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Motivation is also considered as the impulse that leads a person to choose and take action between those alternatives that are presented in a given situation. Indeed, motivation is related to the momentum, because it provides efficiency to the collective effort aimed at achieving the objectives of the company, for example, and pushes the individual to the continuing search for better situations to be professionally and personally, integrating and in the community where its action has a meaning.

The motivation is both objective and action. Be motivated means to identify and, conversely, feel unmotivated represents the loss of interest and significance of the objective or what is, the impossibility of pursuing. The strongest impetus is survival in its purest form when you fight for life, followed by the reasons that derive from the satisfaction of primary and secondary needs (hunger, thirst, shelter, sex, security, protection).

Motivation is a result of the individual’s interaction with the situation. So by analyzing the concept of motivation has to be noted that the level varies, both between individuals and within the same individuals at different times.

The group dynamic is, within the social sciences, the field who is interested in nature, the functioning of small groups and the resulting effects. For example, membership of or reference to a group may encourage certain attitudes, beliefs or opinions. This group’s influence can be significant, affecting performances and individual actions.

The “group dynamics” can facilitate changes in behaviour and / or attitudes of a person or group (cf. the experiments of Kurt Lewin – after the Second World War – aimed at changing American housewives’ attitudes towards certain foods deemed unappetizing).Group dynamics is one of the tools of group therapy. Politicians and businesses may be tempted to try to use the achievements of the group dynamics to personal goals. Moreover, in our time, group dynamics can cause a renewed interest due to the amplification of certain types of interpersonal relationships by the massive use of new technologies. The new communication techniques are used extensively today, that will accelerate and amplify the group phenomena, aggregation, and dissemination of information or rumours.

Literature Review

UK model of corporate governance and the role of codes of practice

Ministry of Finance is considering the UK corporate governance as a system by which employees are responsible for keeping records of the company, carry out their duties to ensure the implementation of the company effective management systems, including financial monitoring and control.

The most comprehensive concept of corporate governance is given by the Organisation for Economic Cooperation and Development (OECD). Principles of Corporate Governance are, “Corporate governance is a system of management and control of companies. Corporate governance structure determines the distribution of rights and responsibilities among the various participants in corporate relations, such as advice, guidance, shareholders and other stakeholders, and establishes rules and procedures for corporate decision-making. Thus, it also determines framework within which the presents the objectives of the company, as well as the means of enforcing such objectives and monitoring performance of the company (Becht 2004, 34-56).”

Anglo-American model is applied in the United Kingdom

Anglo-American model is the corporate governance model used in United Kingdom. The main economic features that influenced the formation of the Anglo-American model are as follows:

There is a high degree of dispersion of the share capital. The main owners of capital of UK companies are a large number of institutional (pension, insurance and investment funds) and an even greater number of small (minority) of private investors. Typically, these funds are distributed among investors, a large number of companies, and shareholders are not connected by any relations with companies in addition to share ownership. Dispersal of investment allows investors to be willing to accept a high degree of risk associated with the activities of companies. Most investors focused on short-term goals, to receive income from foreign exchange. The stock market proceeds by a capital structure and features of regulation. The structure of capital and high liquidity are responsible for the high prevalence of hostile takeovers. The stock market is not just the stock market and the market for companies – it is a transfer of control of major companies. Due to the nature of business law and traditions of the past 60 years, banks play a minor role as shareholders, and their relationships with the companies did not go beyond the relationship of the borrower and the lender.


Quantative relating to measuring by the quantity of something.

Advantages of quantitatave data





Disadvantages of quantitative data

Danger of being seduced by number

Data are constructed wht you looking for and see are interpreting. (Robson 2002.230)

Qualitative data favoured by sociologist, who wish to collect opinion focuses on interpreting meaning and feeling.

Advantages of qualitative data

More personal

Close to Reality

Rich description

Disadvantages of qualitative data

Not scientific


Unreliable not measurable.(Owens.N.B)

From primary research interviewed 20 people thay wrote that sir Terry Leahy leadership style is participative because he sharing knowledge with employee and promoting the interests of the group members and practicing social equality.


There are the following advantages of Anglo-American model:

The high degree of mobilisation of private savings in the stock market, the ease and speed of cross-flow between companies and industries.

Investors are focused on the search spheres, providing a high level of income (through the growth of foreign exchange gain or high dividends), the willingness for this to take high risks, which encourages companies to innovate, finding promising areas of development, support their competitiveness.

Easy “entry” and “exit” for investors in the company.

The high information transparency of companies resulting from these features (Bowen 2004, 110).

The main disadvantages of the Anglo-American model are:

The high cost of debt capital.

The orientation of top managers who have to take into account investors’ expectations, mainly on short-term goals. They are trying to avoid steps that could lead to lower share prices.

Excessive demands on profitability of investment projects.

Significant distortion of the real value of assets of the stock market, a high risk of re-evaluation (usually) or underestimating (rarely) in assets.

Overestimated the level of remuneration of top management.

Role of the board of the directors and how it is structured

On the board, we must distinguish three categories of directors: corporate officers (i.e., executives, those responsible for managing the company, often CEOs or executive officers), the non-executive directors (who are not employed by the company) and finally, the independent directors. To improve the effectiveness of boards, reports based on the model of British, recommend the creation of specialized committees within the board:

– An audit committee, which ensures the appropriateness of accounting policies.

-A compensation committee, responsible for determining the salaries of corporate officers.

– A selection committee, designating officers.

The Board of Directors by virtue of their role are considered as a major element of corporate governance. The main functions of the board of directors have traditionally been considered a strategic management and control of management. This applies to any board, whether a private company or a company with state participation.

The Board of Directors as a body designed to resolve the contradiction caused by the separation of functions in a joint stock company ownership and management, through the supervision of the executive body. Remarkably defined the task of board of directors by the founder of Intel, Andy Grove is “to make sure that the company’s success lasted longer than those of any CEO, the presence of any opportunities in the market and every product cycle” (Cadbury 2002, 11).

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Identify the role of stakeholder, shareholders and institutional investors


The company operates within an environment that consists of many actors; we call these players as stakeholders of the company. The traditional view that the company has to report only to its shareholders is now completely outdated. Between golden parachutes, stock options, the falsity of balance sheets and the excessive release of capital movements, the need for corporate governance incorporating all stakeholders is increasingly felt. In short, the development of corporate social responsibility has to consider that the company must also listen and be accountable to all stakeholders in the company’s business (government, NGOs, consumers, etc) (Lopez 1999, 471).


In United Kingdom, shareholders, through the General Assembly, have the power to appoint Directors including the Chairman. They also have the right to dismiss them. The 1966 law requires the Board to present the company’s accounts at least once a year at the AGM. In addition, some large company operations, such as mergers, require acceptance by the GA. Such decisions are usually taken at AG exceptional expressly convened by the board. The law establishes much of the voting procedures, time of meeting or document and disclosure to shareholders. The rest is determined in the statutes of the company.

It is claimed that the law merely is supplementary to the statutes and the decision to issue obligations is not, under certain conditions, taking into AG. In Anglo-Saxon institutional investors (pension funds, for example) own the majority of companies, so we try to give importance to general meetings and we motivate institutional investors to be more included in deliberations. France saw the development of shareholders’ agreements, which bind as seeks to bring together enough small shareholders to influence the debate, they can play a role in the future with the development of private ownership (Williams 2004, 677).

Institutional investors

The rapid development of institutional investors is one of the highlights of the recent period. These actors who control much of world savings (nearly 30 trillion dollars in 1998), now occupying a significant international financial markets. In Europe, institutional investors have become, by the extent of their participation in the business capital, the dominant players on the European financial market. Individual, institutional funds foreigners living in France are only taking part in small minority businesses, but by their common requirements of corporate governance, they contribute to strengthening the financial power of corporate control.

When institutional investors invest in Anglo-Saxon Europe, they would find themselves in a situation different from that of their country of origin. So this will lead them to change their attitudes towards business. According to Gerard (2001), unlike the U.S., United Kingdom, the activism of minority shareholders (including institutional investors) is composed of a set of legal and associational activities often publicized, with or without proxy battles (Lopez 1999, 471).

The role of groups and teams in organisations

A fundamental unit of organisation, team or working group may be the logical centre of improving the effectiveness of the organisation. Activities relating to the formation of teams in Tesco are to improve its organisational development activity equipment and the sense of participation among its members.

For both groups, the activities concerning the proposed teaming diagnose barriers to good performance of the group, improving the performance of tasks, the relationships between team members and operational processes of this, e.g. the and the allocation of tasks.

How the group and team supports organisational performance

In organisations, teamwork does not just enhance individual and organisational improvements, but is also involved in the improvement of services, both quantitatively and qualitatively. It also provides better management of information and knowledge. It is clear that knowledge of the dynamics of groups and teams, especially their behaviour is very important for leaders and entrepreneurs. Study groups and teams that coexist in any organisation to know how to organize them, use them and multiply their results is a strategy of organisational development (Wakefield 2006, 4). 

Teamwork is part of the new consciousness of modern organisations such as Tesco. It is a fact that they share the goals of the organisation, the results are highly satisfactory. Behaviour and group values ​​are directly involved in carrying out its mission, vision and strategic objectives.

Role of motivation in organisation

The role of motivation in the organisation is defined as a key to success, as employee is the vital resource which should be utilized in a proper way to get outstanding results. However, they are human beings, not machines which would not say anything or would not feel bad or would not get tired. They are the resource which would give the best productivity if their organisation responds to their needs and requirements. Hence, the best way to respond to the needs and requirements of employees is through motivation. Tesco has acknowledged the fact and therefore, do a lot of things to motivate their employees. They enhance both, the intrinsic as well as extrinsic motivation in their employees. The easiest and most effective way to increase motivation of employees is to praise them openly and sincerely to the duties they perform well. A philosophy of participation must be authentic. The manager must really believe that the quality of his decisions will increase through the participation of people who carry them out. He will do two things at once: if a manager takes the time to get his staff to participate in decision making, it will not only motivate the employee, but he will benefit from an improved process. However, such a philosophy of participation takes time (Rejer 2000, 206). 

Ways Tesco uses to motivate its employees

1. By being grateful

2. Spend time with their employees

3. Provide feedback (feedback, process information)

4. Take care of the work environment

5. Provide information about the company

6. Involve employees

7. Encourage autonomy

8. Establish alliances with each worker

9. Celebrate the successes

10. Use the performance to discriminate the task.

Function of leadership in organisation

Leadership is the ability to generate voluntary and collective participation of individuals to the objectives pursued. It is, therefore, the art of directing at the time of freedom. Because leadership is based on the notion – however dubious – participation voluntary, it is distinguished from the notion of authority. If the authority is delegated by the authority based on the hierarchical position held, leadership implicitly refers to bidding process, that is to say, positive identification mechanisms, even projection; people realize that with respect to another. This process creates a situation potentially favourable to the latter and which is also carrier constraints (Gilley 2002, 139).

Role of employee engagement in organisation

Research on organisational commitment gained importance as organisations came to recognize the competitive advantage that can be gained through human resources. Determining factors that relate to organisational commitment may be useful on several levels, and determining the right factors dramatically increases the importance of the research. Organisational commitment is to be strongly related to the intention to leave one’s job and to the intention to search for job alternatives. It is also found a positive relationship between organisational commitment and lateness (tardiness) as well as organisational commitment and turnover. A better understanding of the behaviour and a better knowledge of the antecedents of organisational commitment will therefore enable organisations to manage these withdrawal behaviours (Javadin 2001, 90).

To prevent confusion, it is vital to define the term organisational commitment as clearly as possible. Factors are determined that relate to organisational commitment, and developed one commonly used definition of the term. On the other hand, three factors of organisational commitment are defined; namely, (1) a strong belief in the organisation; (2) a strong acceptance of the organisation, and (3) a strong desire to remain in the organisation.

Tesco has incorporated the above given factors in the organisation culture to enhance the employee commitment to the organisation. They are increasing the employee engagement through various aspects.


In the end, we can say that corporate governance is necessary to set rules and regulation of an organisation. Good corporate governance provides the incentives to protect the interests of the company and shareholders, to monitor the value creation and efficient use of resources to provide transparency of information. Later, the paper has evaluated the leadership practices at Tesco PLC for motivating the employees and enhancing the group and team performance. Motivation is a key to success, as employee is the vital resource which should be utilized in a proper way to get outstanding results. Leadership is the important aspect who can utilize this vital resource through motivation and proper guidance.


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