There was a very good article in the Financial Times today by Luke Johnson. It covers the problems at Tesco and suggests that “the stewardship at Tesco has been woeful“. A particular focus is on the experience of board members, of which only one is executive (recently appointed Dave Lewis). It says “Like every single other director on the main board, he has no executive experience as a retailer whatsoever“. Luke suggests they might have a wide and impressive set of skills, but ones not particular relevant to the business of selling groceries.
Now it’s possible that he read my June 2012 blog post, extracts of which I give below, but I doubt it. It’s just a case of two independent writers coming to the same conclusion after reading the Annual Report I would guess.
“The Board of Tesco – Is it surprising they are in trouble?
Posted by Roger Lawson on June 4, 2012 at 9:30
With a few days holiday over the Jubilee weekend, it’s possible to catch up on reading the Annual Reports of companies that pile through one’s letter box at this time of year. Tesco’s makes particularly amusing reading and might help to explain why they are in some difficulty.
The new Chairman’s introductory statement (from Sir Richard Broadbent) is a classic of management speak. Consider this sentence for example: “First, Tesco is a business with significant strategic optionality”. I think he means they have lots of strategic options. But does not any major company? More to the point perhaps is which options they intend to pursue which he does not say.
So what is the background of the new Chairman? Does he have a long career in major retail businesses? No experience in retail at all in fact. His main career seems to have been in the Civil Service (at the Treasury and HMRC) with a stint at Schroders. He has also served on the boards of Barclays and Arriva.
The board of Tesco actually comprises 14 directors which is surely an unmanageable size. There are 8 non-executive directors. How many of those have any retailing background? None so far as I can see.
Another oddity is that one of the Executive Directors, Lucy Neville-Rolfe (the only female executive director) has several other jobs which include Deputy Chair of the British Retail Consortium, Non-Executive Directorships at ITV and the Carbon Trust, Member of the London Business School’s Governing Body, of the China Britain Business School, the UK India Business Council and the Corporate Leaders Group on Climate Change. She joined the board from the Cabinet Office.
This board looks like that of many banks before they got into difficulties – where they were full of non-bankers who did not intrinsically understand the business but with high profiles in other respects, i.e. the “great and the good”. Not the kind of board that would have challenged Tesco’s CEO on his decision to venture to compete on the US West Coast which has proved very unwise.”
Now I understand that the board has been reduced in size slightly since those comments were posted, but Luke Johnson spells out that its characteristics have not changed in essence. After attending a subsequent AGM of Tesco, I sold my holding because that did not impress me either. So surely the moral for investors is read the Annual Report and attend AGMs – or of course become a ShareSoc member and read the ShareSoc newsletters and blogs, where you would have got this story sooner and at less cost than subscribing to the FT.