Tesco breaks governance standard
Tesco has lost a second non-executive director because of a conflict of interest.
By Amy Wilson
October 1, 2008
Mervyn Davies (pictured at far left in the wire rim glasses), chairman of UK bank Standard Chartered, resigned from the retailer’s board yesterday because of the potential conflict arising from Tesco’s expansion in financial services.
His departure will leave Tesco with 14 board members, six of whom are non-executive, including chairman David Reid.
Non-executive directors, excluding the chairman, should make up at least half the board, according to the Financial Reporting Council’s combined code on corporate governance.
Carolyn McCall, chief executive of Guardian Media Group, resigned in April after Tesco started a libel action against the Guardian, which was settled with an apology from the newspaper group.
The supermarket giant’s expansion plans include agreeing to buy out Royal Bank of Scotland’s stake in its Tesco Personal Finance business for £950m in July.
It is looking at offering mortgages and current accounts as the credit crisis cuts a swathe through Britain’s banks and mortgage lenders.
To beef up its presence in the sector, Tesco is moving finance director Andy Higginson into a new role as chief executive of retailing services, which includes the personal finance business.
The retailer plans to expand financial services in its international business, which is where it would come into direct competition with Standard Chartered.
The bank has high street branches across Asia, and Tesco has stores in China, Korea, Japan and Thailand.
Tesco said it has no immediate plans to offer banking services outside the UK.
Mr. Davies joined the Tesco board in 2003 and will leave at the end of the month. Tesco chairman David Reid said he accepted the resignation “with great regret”.
Tesco’s remaining non-executive directors are: Rodney Chase, chairman of Petrofac; Charles Allen, former chief executive of ITV; Karen Cook, president of Goldman Sachs in Europe; Harald Einsmann, a board member of Carlson Group; and Ken Hydon, also a non-executive director of Reckitt Benckiser.
A spokesman for Tesco said the breach of the corporate guidance was temporary.
“We are already looking for a replacement for Mervyn Davies and we are close to announcing a replacement for Carolyn McCall that will redress the balance of executives and non-executives”, he said.
(Photo credit: Justin Thomas, UK Telegraph.)