OLD (Pre-Period 35) Topic 17 Corporate Governance – RESUBMISSIONS ONLY

@trephena
Hello.
When I began the project I wrote out routine objective questions without realising I had to be specific. Since in my part 3, My format is yes to go over the UK CG code principles but i eleborate it not by whether Tesco has complied to codes or not but to focus on principles and sub provision where I can talk about what problems has arisen in tesco or how there compliance or action is regarded in terms of addressing the issues at its CG forefront. Moreover, I have found little value of comparativ companies in This specific case and have only made very few routine comparisons thus far. So my question to you is, what would be the right objective questions I should list out? As I doubt my current questions like 1) what is the extent of Tesco’s compliance to UK CG code?
2) to what extent can they be compared to competitors known for good CG?

Since I am currently going principle by principle but writing only under sub provision where I can criticize or where there actions stated in annual report is significant in addressing there performance moving forward, i feel like those obejctive questions do not do justice.

Please help.
In addition to that, when I talk under accountability what do u suggest main headlines would be for Tesco?

Thank you

@trephena
Thank you for the reply.
Like I have mentioned I just feel that I need to rephrase or add more objective questions to my part 2 because my part 3 thus far is not just looking at the compliance checks that they have clearly laid out on the annual report, my format is going through the code and under relevant sub provision which I feel I can talk more,point out like you said whether ‘compliance’ they refer to have been adequate. I am going through this structured format but objective like you said simliar to those. so I shall update my part 2 questions a bit more.
I feel that presenting that they have complied and explained the non compliances,fully to the code even presenting as a table maybe too superficial, instead my strategy has been just to elaborate on code provisions that I can say thaat despite compliance ,it brings about questions as to how effective its been? like that. I hope you get what am saying hehe.
But yes I guess I can continue.
Thank you.

@Eena -well for a start I would go back and cover from 2012 onwards for this point and show how all of these reports complied with the Code too BUT….. and follow this with what has been discovered since. Remember the brief for this topic is an evaluation of the QUALITY of the company’s CG, NOT how well it follows the Code to the letter! A discussion of how effective the audit committee was in reality may be appropriate.

For evaluating Accountability consider aspects of agency theory, whether the Tesco board just informs their stakeholders or do they actually listen to them? You might also here or later (as pat of your summing up) consider whether the dual board model (as in Germany) might serve stakeholders better. You can also bring in Transparency as it goes hand in hand with accountability – the fact that it needed a whistleblower to reveal what was really going on shows that senior managers were either complicit in distorting figures or guilty of dereliction of duty. Consequently internal controls must have been weak as no-one either picked up on the malpractice or more sinisterly, if they did, their questioning of it was suppressed.

@sssteeeve – This topic is about the QUALITY of an organisation’s CG. You assess elements of this and draw comparisons with other companies and codes in Part 1. In Part 2 which is a fairly distinct part you examine the organisation’s relationship with its various stakeholders having analysed what particular groups these are.

So you need to look at how it communicates and treats these relevant groups. As I have explained elsewhere in this forum, the main duty to shareholders is profit maximization so returns to shareholders are a measure of how well it is controlling and directing operations. For other aspects of the shareholder communication and relationships you will have to read through the posts on here as I can’t keep repeating all the Info.

For regression analysis you would need to have reliable data and you would need to be able to establish a definite relationship between the dependent and independent variables. You are unlikely to find such robust data though you may be able to show trends in revenue/ profit per employee and the like. I suggest you read the following article on measuring effectiveness

https://knowledge.insead.edu/leadership-organisations/measuring-the-effectiveness-of-corporate-governance-1149

@Eena – some brief comparisons perhaps but stick to the main focus of relationships with stakeholders and shareholders (and assessing the quality of the CG overall). You can use up-to-the minute info and consider its implications. Remember it is your commentary and critical evaluation based on available evidence that is most important – so don’t get bogged down in unnecessary detail unless it advances your arguments or adds ‘value’

@Eena – yes those 3 are fine but you should look a little at the employee and employer relationship too (look at my recent posts on T20 on this as there is a bit of an overlap between the T20 ans T17 in places).

Suppliers definitely have low power in many situations particularly when it comes to relationships with supermarkets. The importance of the supplier’s main customers to its business will be critical and will therefore dictate the level of their interest. Again for most suppliers to supermarkets the supermarket will be their principal customer, so yes the supplier interest will be high. Comment on the power imbalance i.e. suppliers are in the very much weaker position! (and Tesco has not historically dealt very fairly with its suppliers)

@Sonu – I could be wrong but I think if you look at the FRC preamble to the 2014 Code you will see that it applies to reporting periods that START after Oct 2014. Tesco ‘s 2015 FS run from Feb 2014 so the 2012 Code in that case would still be applicable. You could comment on any significant differences that the 2014 Code might have made to Tesco if they had applied it.

(If I have read the rules wrongly please let me know as I don’t have the 2014 Code to hand – I am just recalling what I believe I read a few months back) 🙂

@Trephena – Having read through this thread, I have made changes to my objectives to try and make them more meaningful and analytical. I need reassurance that my draft list below is not too far fetched and disconnected (esp. No. 3)
1. To assess the quality of corporate governance within Tesco plc
2. To evaluate the impact of Tesco’s corporate governance on its key stakeholders.
3. To what extent (or lack thereof) has the UK CG code developed to tackle the turbulent business and economic environment.
4. What role (if any) has UK CG code played in the corporate governance failure of Tesco plc.
5. To develop my business analytical skills

I just need to know whether I am headed in the right direction.

Many thanks

@Sonu – In my role as Forum Moderator I am here to suggest ways to pass your RAP so my advice is that you really do need to focus on Tesco and the quality (or lack of it) of their CG for your RAP. Although you may do some discursive commentary looking at whether the CG code is relevant or tends to encourage a ‘tick box’ approach, try to show this predominantly in the context of Tesco (although you could bring in some other brief examples of this in other companies).

Overall your marker will be looking to see that you have correctly and appropriately interpreted the project brief. If they end up concluding that your RAP is more about whether the CG Code serves a relevant purpose and the spirit of Cadbury etc has been circumvented they are likely to fail it. It is a case of balance – discussion of some of your proposals could well bring up your grade (as it falls within critical thinking – what markers like to see in work) but it is a case of not overdoing it. I do appreciate though that exploring these other issues is probably far more interesting than doing the stakeholder analysis part for example…. 🙂

So regarding your research proposals above I would suggest you work towards

1. 40%
2. 40%
3. 10%
4. 10%
5. This is something that is more personal and it would be appropriate to use it as the foundation to your SLS self-reflection

From my personal perspective I think you have raised some very valid and interesting ssues and these might be something that you might like to pursue further if you did some post-graduate study. 😀 – Trephena

@segem – the codes in essence form the business techniques and the Mendelow matrix is appropriate for stakeholder analysis. In principle there is no reason why you cannot use the codes you have mentioned however the over riding consideration should be best practice. In this respect Transparency International has serious concerns about the level of corruption in some countries and unfortunately Nigeria has never ranked well in their Corruption Perception Index over the years and this has been a cause for concern -see the attached https://www.transparency.org/news/feature/nigerias_corruption_challenge
I think this offers you a unique opportunity to consider the potential effect of corruption in the banking sector. So possibly you might like to bring in some of these aspects into your RAP and mention legislation from other countries that might benefit your company were they to be implemented in Nigeria -I am thinking here of the UK Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act 1977

As with Sonu above do focus principally on the main brief of quality of CG and stakeholders but you could do a similar split to the one I suggested there with 10% weighting given to the problem of corruption in Nigeria and 10% to an assessment of the perception of corruption that exists in the banking sector in general and your company in particular and whether their practices would fall on the right side of the legislation mentioned or how adoption of similar laws would strengthen the integrity of the company. I think this could add a new dimension to your work and introduce some critical thought (so beloved and desired by markers)

You can outline the principles you mention and in fact that is where you can perhaps introduce the corruption issue

@trephena
Tesco’s major shareholders combined percentage seems to be only 12.008%, I am confused as to whether these are the institutional investors. if the percentage is this, how can we say that they have power?
Morever I am having trouble narrowing down what to focus on when it comes to the stakeholder part of my project. Please guide me 🙂

@segem Yes do use local laws and consider whether they are perceived as effective and have influential they have been generally and specifically on the bank.

The brief relates to the main title and yes I was referring to Part 3. The reader needs to see that you have mainly concentrated on quality of CG and the stakeholder analysis aspects. However as corruption could be a particular issue in Nigeria it would be appropriate to over this a little and certainly as I mentioned adds to the value of your work through critical thought. So weighting are not the exact number of words bit a roughly as a guide.

Yes try to do pie charts for internal stats if they lend themselves to this (basically to show proportion of a whole). and maybe bar charts for pay comparisons with another bank and that sort of thing. Just remember graphs etc. save on words and enhance the appearance of work.