Tesco, the UK’s grocery giant, has come bottom of an index looking at good governance among the country’s 100 largest companies.
In the second of the Institute of Directors’ Good Governance Reports the supermarket was last only to Berkeley Group, the upmarket house builder.
The index was headed by British American Tobacco followed closely by Unilever.
Tesco’s position follows a period in which the company’s accounting troubles have made frequent headlines. Berkeley Group recently became the subject of news when the chairman’s pay came under attack from shareholders.
Ken Olisa, chairman of the report’s advisory panel, said: “This has been a difficult year for business, with MPs lambasting the directors of major high street brands, and the prime minister making clear that corporate boards are in her crosshairs.
“This all came hot on the heels of the EU referendum, during which big companies were often presented as the bad guys. This is bad for business and bad for the country – business is a part of our society not apart from it.
“Given the mood music, it has never been more important that directors understand what good governance looks like, and what practical measures can be taken to improve and to convince the outside world they are delivering it.”
The IoD’s index is based on bringing together measurable data with the perceptions of investors, business leaders and governance professionals.
Research looked at 34 factors in five main areas: board effectiveness; audit and risk external accountability; remuneration and reward; shareholder and stakeholder relations.
Intriguingly, based upon perception alone, Smiths Group came out top while Tesco still came in at 99.
While the rankings are interesting, the IoD drew other observations from the study. Chief among them was the conclusion that elements of governance do not carry equal weight in perceptions of corporate governance.
The IoD found that measures of audit and risk/external accountability “are the most important determinants of corporate governance as perceived by all stakeholders”.
Meanwhile, measures of board effectiveness are not widely perceived as having an effect on governance inside companies.
Among the other observations were that customers appear to care more about shareholder relations, while investors and analysts appear to care more about stakeholder relations.