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Tesco accounting black hole deepens - Coggle Diagram
Tesco accounting black hole deepens
overstated its profits by £263m for at least two years:118 for recent half year,70 for 13-14,75 for before
First half profits fell by a massive 92% while Tesco's share price plummeted 7%
Nobody gained financially as a consequence of the overstatement of performance
chairman Sir Richard Broadbent announced his resignation, eight executives have been suspended
a new management team , scrapped its profits outlook
Three immediate priorities: restoring competitiveness in our core UK business; protecting and strengthening our balance sheet; begin the long journey of rebuilding trust and transparency in the business and the brand
An eventful six months for Tesco.
07 April 2014: CFO Laurie McIleew announces his decision to stand down
10 July 2014: Marks & Spencer confirms its CFO, Alan Stewart, will join Tesco after a period of garden leave.
21 July 2014: Philip Clarke is sacked after three years as CEO, Dave Lewis of Unilever is announced as his replacement.
29 August 2014: Lewis’ start as CEO is brought forward one month
22 September 2014: Tesco admits profits were overstated by £250m. Four executives, including UK managing director Chris Bush, are suspended.
23 September 2014: Tesco announces that Stewart is to start immediately
7 October 2014: Kevin Grace, Tesco’s group commercial director, is asked to step down.
14 October 2014: Three more executives are asked to step down
1 more item...
the view from the industry
1.Leadership
Turmoil at the top created a vacuum
, with both the CEO and CFO going; managers want to
flatter their result**
s
; a fundamental failure of leadership by the chairman:t
op management turmoil
creates problems; the
performance culture**; take responsibility not just for successes but also for failures.
2.Corporate culture
If people are
set targets
they cannot meet and if they are afraid for the p
ersonal consequences
to them of
failing to meet these targets
, they are more likely to
compromise
on
ethical standards.
all this happened as a result of a
leadership vacuum
because of the transition but, really, the company’s deeply-embedded values should have seen it through this
3.Hubris/arrogance/
Tesco became
arrogant.
It luxuriated in unsustainable operating margins of 5% –
higher than almost all rivals
;Tesco’s
massive investmen
t in giant shops on retail parks looks like
imperial overstretch
4.Change
the
grocery market growth rate
dropped off. Now,
losing share means losing revenue
; this would bring about
immense pressure
on Tesco’s finance team
5.Corporate governance
Tesco’s recent profit misstatement involves problems concerning revenue recognition, particularly around so-called contributions it receives from its suppliers
6.Complacency
Tesco, like its major rivals, has been
too slow and complacent
in seeing
competitors overtaking
;When this happens you need a strong and well-respected leader who can
galvanise/stimulate
the team and take action