THE recent troubles at retail giant Tesco, which last month posted a record loss of £6.38bn in its last financial year, were due to “managerial incompetence”, according to CEO mentor Andrew Garner.
Speaking at ACCA UK’s annual internal audit conference in London, Garner, CEO at executive search firm Garner, told delegates that internal auditors need to “be different from other auditors and look out the window”.
He referenced the recent troubles at Tesco, which is currently facing probes by the Serious Fraud Office and the Financial Reporting Council over its accounting practices, as not “being down to the weather or climate change but to managerial incompetence – a self-inflicted wound”.
Garner then recounted a recent meeting with a friend – “a senior independent director on the board of Tesco” who said Sir Terry Leahy, Tesco’s former chief executive who is credited with turning the business into a retail powerhouse and taking it overseas, should have gone in 2010 and had “been there too long”.
“The organisational consequence of that, of which you in your function should be aware, is that he might have been titled chief executive, but he wasn’t. Leahy ran the whole blooming thing. He was chairman, chief executive and chief cook and bottle washer. Nothing moved there without him saying so, Garner said.
According to Garner, this was a classic example of poor governance. He said the jury “was still out on whether Sir Richard Broadbent, who came in as chairman during the subsequent regime of [CEO] Phillip Clarke “exercised good governance”.
During Leahy’s time as chief executive, Tesco outpaced rivals including Marks & Spencer and Sainsbury’s and delivered record earnings every year between 2001 and 2010.
Garner was speaking at the dramatically titled ‘Auditing the Four Horsemen of the Apocalypse‘ event whhich saw delegates from a broad cross-section of the business community – from private to FTSE 100 and the public sector – come together to hear speakers tackle a diverse array of subjects including cyber security, crisis and continuity planning and implementing risk management.
Darren Brooks, practice director of Wipro, walked delegates through the myriad threats and dangers that relentlessly target business IT systems – and some of teh steps to help tackle those threats, while Daniel Roberts, group head of risk at FCG, gave an entertaining and informative presentation on crisis and continuity planning for business, drawing on real experiences from across the world including New Zealand, Thailand and the USA.
Rui Bastos, group head of audit and risk management at Reliance Industries, presented a series of practical lessons on how best to implement enterprise risk management, while Richard Archer, chief risk adviser provided insight into practical auditing of project risk management.
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