Aisle be going
Tesco’s chairman should step aside. Richard Broadbent will struggle to restore market confidence in the troubled UK supermarket group, and to convince investors the board is on top of matters. This week’s accounting scandal has compounded existing concerns about his period at the helm. The priority should be an orderly handover to the right successor as soon as possible.
For a company of Tesco’s size – a market capitalisation of 16 billion pounds – to overstate profit guidance by 250 million pounds is an extremely serious governance failure. The chairman is ultimately accountable, and should show it.
The overstatement may yet turn out to be smaller than initially estimated. Either way, the damage to credibility remains: Tesco’s numbers should be trustworthy.
There have been other slips during Broadbent’s tenure. Tesco was without a finance director for five months this year – again, an astonishing situation for a blue-chip multinational. There was also an exodus of executive talent while Philip Clarke was chief executive between March 2011 and August just gone. The board could have got a grip faster.
Right now, Tesco would be better off chaired by someone expert in Tesco’s core grocery business. Broadbent is smart and experienced. But new CEO Dave Lewis is not a retailer. He needs a mentor from the industry.
The priority should be a clean succession. Broadbent could indicate now that he will step down at the next annual meeting, although that is nine months away. Another board member could be promoted, or an outsider appointed, on an acting basis. An external appointment would enable Tesco to publish its investigation into the accounting errors without fear of being accused of a whitewash.
Tesco is a big challenge. But someone suitable will be persuaded to take it on. Allan Leighton, former Asda CEO and current boss of Pandora, is one possibility. Or ITV chairman Archie Norman, also former CEO of Asda. Justin King, the former boss of J Sainsbury, has the skills – if he can compete aggressively with his old company.
Broadbent has been unlucky. He inherited a mess. The interregnum in the finance function was partly the result of him engineering change. But the fact remains: stepping down would be the honorable course.