23 October 2014
Tesco is plagued by succession woes as its chair Sir Richard Broadbent has announced he is stepping down after a bigger financial hole is found.
The retail giant’s interim results came out on 23 October, which revealed that the financial hole discovered at the end of September had been understated by £13 million. The actual deficit figure is £263 million, which Tesco originally stated was £250 million.
Sir Richard Broadbent said in a company statement: ‘I will begin now to prepare the ground to ensure an orderly process for my own succession at that time’, implying that prior to this, succession planning had been inadequately prepared for, thus leading to the current situation of not having a replacement ready.
ICSA Chief Executive Simon Osborne, arriving at the same conclusion, commented that needing an undisclosed amount of time ‘to sort out his successor points to a possible lack of succession planning at Tesco’.
He adds: ‘Succession planning is something that all organisations should be concerned with, which an article I wrote in the November issue of G+C points out.’
In addition, Osborne says that the ‘July 2014 Boardroom Bellwether showed that only 44% of respondents had a written succession plan in place for their board. Perhaps the tragic sudden death in Moscow this week of Total’s chief Christophe de Margerie and the Tesco debacle will serve as reminders to boards that properly managing succession at all levels is a business critical requirement.’
ICSA Policy Director Peter Swabey commented on the role of Tesco’s external auditors, as well as looking at previous years’ audits: ‘[of concern] is the length of time over which the practice of misreporting has flourished … this brings into question the degree of culpability that can be laid at the door of Tesco’s auditor. How clear were any warnings that they gave to the Audit Committee, the Board or shareholders?
Swabey also questions the board’s responsibility in this mess: ‘[if] commercial income was one of the areas on which they state their audit focussed, was a note in the report of the Audit Committee to the effect that “commercial income was an area of focus for the external auditors based on their assessment of gross risks ….. [but that] …. management operates an appropriate control environment which minimises risks in this area. As a result, the Committee does not consider that this is a significant issue for disclosure in its report” sufficiently fair, balanced and understandable a disclosure?’