Corporate Governance Leadership And

Motivation Of Tesco Plc

Executive Summary
In this paper, we are trying to explore the concept of corporate governance in a
holistic context. This research analyses the UK model of corporate governance and
the role of codes of practice. Afterwards, the paper is exploring the importance of
leadership and motivation in enhancing the groups and team performance in an
organisation. In the end, we can say that corporate governance is necessary to set
rules and regulation of an organisation. Good corporate governance provides the
incentives to protect the interests of the company and shareholders, to monitor the
value creation and efficient use of resources to provide transparency of information.
Later, the paper has evaluated the leadership practices at Tesco PLC for motivating
the employees and enhancing the group and team performance. Motivation is a key
to success, as employee is the vital resource which should be utilized in a proper way
to get outstanding results. Leadership is the important aspect who can utilize this
vital resource through motivation and proper guidance.

Introduction
Jack cohen started his business in 1919 and it was a market stall which was in London
East end and Hackney. Before 1924 he also operated wholesale business. Then he
named business Tesco in 1924. Tesco opened two stores in Becontree and Burnt Oak
in 1931. From 1939 business expended further. In 1947 Tesco entered in the stock
exchange as a Tesco store Limited. In 1950 to 1960 Tesco grew fast. In 1987 Tesco
was taken over Hillards. Teso started loyalty card in 199, afterwards Tesco lunched
online shoping service .In 2003 Tesco joint venture with 02 and started Tesco. Tesco
UK store are divided six part such as:(Tesco 2012)

Tesco extra

Tesco super store

Tesco metro

Tesco express

One stop

Tesco home plus(Tesco 2012)

In the first half of 2011 Tesco made £1.9 billion profit. Tesco also Britain biggest
private sector where 30,000 working in this county.(Tesco 2012)

Leadership style of Terry Leahy

Terry Leahy Born 28 February 1956 Liverpool, UK and he obtained BSC(HONS)degree
Management science in 1977. He applied several job but unsuccessful. He applied to
Tesco again and got this job. In 1997 become CEO of Tecco this was third biggest
retailer in the world according by revenues. In this time he was implementing the
Tesco club card loyality pogram. Leahy contuned visited Tesco stores specially in the
weekend. With Leahy direction Tesco announced £2 billion profit in April 2005.(The
economist 2002)

Aim and Objective

Corporate governance of Tesco

The leadership style of sir Terry Leahy

Investigatin and evaluating ‘Corporate Governance ‘ and Leadership circumstances

The Organisation for Economic Cooperation and Development (OECD) issued in May
1999 and revised in 2004 its “Principles of Corporate Governance” in which are the
basic ideas that shape the concept that is used by member countries and some
others in the process of becoming. The OECD principles provide that the QA
framework must:

Protect the rights of shareholders.

Ensure equitable treatment for all shareholders, including minority and foreign.

All shareholders should have the opportunity to obtain effective reparation of

damages for the violation of their rights.

Recognize the rights of third parties and to promote active cooperation between
them and the societies in creating wealth, generating jobs and businesses achieve
financial sustainable.

Ensure there is a proper and timely disclosure of all relevant matters of the company,
including financial situation, performance, shareholding and management.

Ensure the strategic guidance of the company, effective monitoring of the

management team by the board of directors and the responsibilities of the Board of
Directors and its shareholders (Arcot 2005, 11).
Leadership motivation: Motivation is a characteristic that helps a person achieve his
or her objectives. To maintain level of commitment and effort, organizations need to
adequately assess the cooperation of its members, establishing mechanisms to have
a workforce sufficiently motivated to perform efficiently and effectively, leading to
the achievement of the objectives and goals of the organization and at the same
time achieve the expectations and aspirations of its members.

Motivation is also considered as the impulse that leads a person to choose and take
action between those alternatives that are presented in a given situation. Indeed,
motivation is related to the momentum, because it provides efficiency to the
collective effort aimed at achieving the objectives of the company, for example, and
pushes the individual to the continuing search for better situations to be
professionally and personally, integrating and in the community where its action has
a meaning.

The motivation is both objective and action. Be motivated means to identify and,
conversely, feel unmotivated represents the loss of interest and significance of the
objective or what is, the impossibility of pursuing. The strongest impetus is survival in
its purest form when you fight for life, followed by the reasons that derive from the
satisfaction of primary and secondary needs (hunger, thirst, shelter, sex, security,
protection).

Motivation is a result of the individual’s interaction with the situation. So by

analyzing the concept of motivation has to be noted that the level varies, both
between individuals and within the same individuals at different times.

The group dynamic is, within the social sciences, the field who is interested in nature,
the functioning of small groups and the resulting effects. For example, membership
of or reference to a group may encourage certain attitudes, beliefs or opinions. This
group’s influence can be significant, affecting performances and individual actions.

The “group dynamics” can facilitate changes in behaviour and / or attitudes of a

person or group (cf. the experiments of Kurt Lewin – after the Second World War –
aimed at changing American housewives’ attitudes towards certain foods deemed
unappetizing).Group dynamics is one of the tools of group therapy. Politicians and
businesses may be tempted to try to use the achievements of the group dynamics to
personal goals. Moreover, in our time, group dynamics can cause a renewed interest
due to the amplification of certain types of interpersonal relationships by the massive
use of new technologies. The new communication techniques are used extensively
today, that will accelerate and amplify the group phenomena, aggregation, and
dissemination of information or rumours.

Literature Review
UK model of corporate governance and the role of codes of practice
Ministry of Finance is considering the UK corporate governance as a system by which
employees are responsible for keeping records of the company, carry out their duties
to ensure the implementation of the company effective management systems,
including financial monitoring and control.

The most comprehensive concept of corporate governance is given by the

Organisation for Economic Cooperation and Development (OECD). Principles of
Corporate Governance are, “Corporate governance is a system of management and
control of companies. Corporate governance structure determines the distribution of
rights and responsibilities among the various participants in corporate relations, such
as advice, guidance, shareholders and other stakeholders, and establishes rules and
procedures for corporate decision-making. Thus, it also determines framework within
which the presents the objectives of the company, as well as the means of enforcing
such objectives and monitoring performance of the company (Becht 2004, 34-56).”

Anglo-American model is applied in the United Kingdom

Anglo-American model is the corporate governance model used in United Kingdom.
The main economic features that influenced the formation of the Anglo-American
model are as follows:

There is a high degree of dispersion of the share capital. The main owners of capital
of UK companies are a large number of institutional (pension, insurance and
investment funds) and an even greater number of small (minority) of private
investors. Typically, these funds are distributed among investors, a large number of
companies, and shareholders are not connected by any relations with companies in
addition to share ownership. Dispersal of investment allows investors to be willing to
accept a high degree of risk associated with the activities of companies. Most
investors focused on short-term goals, to receive income from foreign exchange. The
stock market proceeds by a capital structure and features of regulation. The structure
of capital and high liquidity are responsible for the high prevalence of hostile
takeovers. The stock market is not just the stock market and the market for
companies – it is a transfer of control of major companies. Due to the nature of
business law and traditions of the past 60 years, banks play a minor role as
shareholders, and their relationships with the companies did not go beyond the
relationship of the borrower and the lender.

Methodology
Quantative relating to measuring by the quantity of something.

Advantages of quantitatave data

Breadth

Replicable

Specipic

Generalizable

Disadvantages of quantitative data

Danger of being seduced by number

Data are constructed wht you looking for and see are interpreting. (Robson
2002.230)

Qualitative data favoured by sociologist, who wish to collect opinion focuses on

interpreting meaning and feeling.

Advantages of qualitative data

More personal

Close to Reality

Rich description

Disadvantages of qualitative data

Not scientific

Subjective

Unreliable not measurable.(Owens.N.B)

From primary research interviewed 20 people thay wrote that sir Terry Leahy
leadership style is participative because he sharing knowledge with employee and
promoting the interests of the group members and practicing social equality.

Discussion
There are the following advantages of Anglo-American model:
The high degree of mobilisation of private savings in the stock market, the ease and
speed of cross-flow between companies and industries.
Investors are focused on the search spheres, providing a high level of income
(through the growth of foreign exchange gain or high dividends), the willingness for
this to take high risks, which encourages companies to innovate, finding promising
areas of development, support their competitiveness.

Easy “entry” and “exit” for investors in the company.

The high information transparency of companies resulting from these features

(Bowen 2004, 110).

The main disadvantages of the Anglo-American model are:

The high cost of debt capital.

The orientation of top managers who have to take into account investors’
expectations, mainly on short-term goals. They are trying to avoid steps that could
lead to lower share prices.

Excessive demands on profitability of investment projects.

Significant distortion of the real value of assets of the stock market, a high risk of re-
evaluation (usually) or underestimating (rarely) in assets.

Overestimated the level of remuneration of top management.

Role of the board of the directors and how it is structured

On the board, we must distinguish three categories of directors: corporate officers
(i.e., executives, those responsible for managing the company, often CEOs or
executive officers), the non-executive directors (who are not employed by the
company) and finally, the independent directors. To improve the effectiveness of
boards, reports based on the model of British, recommend the creation of specialized
committees within the board:

– An audit committee, which ensures the appropriateness of accounting policies.

-A compensation committee, responsible for determining the salaries of corporate

officers.

– A selection committee, designating officers.

The Board of Directors by virtue of their role are considered as a major element of
corporate governance. The main functions of the board of directors have traditionally
been considered a strategic management and control of management. This applies
to any board, whether a private company or a company with state participation.
The Board of Directors as a body designed to resolve the contradiction caused by the
separation of functions in a joint stock company ownership and management,
through the supervision of the executive body. Remarkably defined the task of board
of directors by the founder of Intel, Andy Grove is “to make sure that the company’s
success lasted longer than those of any CEO, the presence of any opportunities in the
market and every product cycle” (Cadbury 2002, 11).

Identify the role of stakeholder,

shareholders and institutional investors
Stakeholder
The company operates within an environment that consists of many actors; we call
these players as stakeholders of the company. The traditional view that the company
has to report only to its shareholders is now completely outdated. Between golden
parachutes, stock options, the falsity of balance sheets and the excessive release of
capital movements, the need for corporate governance incorporating all stakeholders
is increasingly felt. In short, the development of corporate social responsibility has to
consider that the company must also listen and be accountable to all stakeholders in
the company’s business (government, NGOs, consumers, etc) (Lopez 1999, 471).

Shareholder

In United Kingdom, shareholders, through the General Assembly, have the power to
appoint Directors including the Chairman. They also have the right to dismiss them.
The 1966 law requires the Board to present the company’s accounts at least once a
year at the AGM. In addition, some large company operations, such as mergers,
require acceptance by the GA. Such decisions are usually taken at AG exceptional
expressly convened by the board. The law establishes much of the voting procedures,
time of meeting or document and disclosure to shareholders. The rest is determined
in the statutes of the company.

It is claimed that the law merely is supplementary to the statutes and the decision to
issue obligations is not, under certain conditions, taking into AG. In Anglo-Saxon
institutional investors (pension funds, for example) own the majority of companies,
so we try to give importance to general meetings and we motivate institutional
investors to be more included in deliberations. France saw the development of
shareholders’ agreements, which bind as seeks to bring together enough small
shareholders to influence the debate, they can play a role in the future with the
development of private ownership (Williams 2004, 677).
Institutional investors
The rapid development of institutional investors is one of the highlights of the recent
period. These actors who control much of world savings (nearly 30 trillion dollars in
1998), now occupying a significant international financial markets. In Europe,
institutional investors have become, by the extent of their participation in the
business capital, the dominant players on the European financial market. Individual,
institutional funds foreigners living in France are only taking part in small minority
businesses, but by their common requirements of corporate governance, they
contribute to strengthening the financial power of corporate control.

When institutional investors invest in Anglo-Saxon Europe, they would find

themselves in a situation different from that of their country of origin. So this will
lead them to change their attitudes towards business. According to Gerard (2001),
unlike the U.S., United Kingdom, the activism of minority shareholders (including
institutional investors) is composed of a set of legal and associational activities often
publicized, with or without proxy battles (Lopez 1999, 471).

The role of groups and teams in organisations

A fundamental unit of organisation, team or working group may be the logical centre
of improving the effectiveness of the organisation. Activities relating to the formation
of teams in Tesco are to improve its organisational development activity equipment
and the sense of participation among its members.

For both groups, the activities concerning the proposed teaming diagnose barriers to
good performance of the group, improving the performance of tasks, the
relationships between team members and operational processes of this, e.g. the and
the allocation of tasks.

How the group and team supports organisational performance

In organisations, teamwork does not just enhance individual and organisational
improvements, but is also involved in the improvement of services, both
quantitatively and qualitatively. It also provides better management of information
and knowledge. It is clear that knowledge of the dynamics of groups and teams,
especially their behaviour is very important for leaders and entrepreneurs. Study
groups and teams that coexist in any organisation to know how to organize them,
use them and multiply their results is a strategy of organisational development
(Wakefield 2006, 4). 

Teamwork is part of the new consciousness of modern organisations such as Tesco. It

is a fact that they share the goals of the organisation, the results are highly
satisfactory. Behaviour and group values ​​are directly involved in carrying out its
mission, vision and strategic objectives.
Role of motivation in organisation
The role of motivation in the organisation is defined as a key to success, as employee
is the vital resource which should be utilized in a proper way to get outstanding
results. However, they are human beings, not machines which would not say
anything or would not feel bad or would not get tired. They are the resource which
would give the best productivity if their organisation responds to their needs and
requirements. Hence, the best way to respond to the needs and requirements of
employees is through motivation. Tesco has acknowledged the fact and therefore, do
a lot of things to motivate their employees. They enhance both, the intrinsic as well
as extrinsic motivation in their employees. The easiest and most effective way to
increase motivation of employees is to praise them openly and sincerely to the duties
they perform well. A philosophy of participation must be authentic. The manager
must really believe that the quality of his decisions will increase through the
participation of people who carry them out. He will do two things at once: if a
manager takes the time to get his staff to participate in decision making, it will not
only motivate the employee, but he will benefit from an improved process. However,
such a philosophy of participation takes time (Rejer 2000, 206). 

Ways Tesco uses to motivate its employees

1. By being grateful

2. Spend time with their employees

3. Provide feedback (feedback, process information)

4. Take care of the work environment

5. Provide information about the company

6. Involve employees

7. Encourage autonomy

8. Establish alliances with each worker

9. Celebrate the successes

10. Use the performance to discriminate the task.

Function of leadership in organisation

Leadership is the ability to generate voluntary and collective participation of
individuals to the objectives pursued. It is, therefore, the art of directing at the time
of freedom. Because leadership is based on the notion – however dubious –
participation voluntary, it is distinguished from the notion of authority. If the
authority is delegated by the authority based on the hierarchical position held,
leadership implicitly refers to bidding process, that is to say, positive identification
mechanisms, even projection; people realize that with respect to another. This
process creates a situation potentially favourable to the latter and which is also
carrier constraints (Gilley 2002, 139).

Role of employee engagement in organisation

Research on organisational commitment gained importance as organisations came

to recognize the competitive advantage that can be gained through human
resources. Determining factors that relate to organisational commitment may be
useful on several levels, and determining the right factors dramatically increases the
importance of the research. Organisational commitment is to be strongly related to
the intention to leave one’s job and to the intention to search for job alternatives. It
is also found a positive relationship between organisational commitment and
lateness (tardiness) as well as organisational commitment and turnover. A better
understanding of the behaviour and a better knowledge of the antecedents of
organisational commitment will therefore enable organisations to manage these
withdrawal behaviours (Javadin 2001, 90).

To prevent confusion, it is vital to define the term organisational commitment as

clearly as possible. Factors are determined that relate to organisational commitment,
and developed one commonly used definition of the term. On the other hand, three
factors of organisational commitment are defined; namely, (1) a strong belief in the
organisation; (2) a strong acceptance of the organisation, and (3) a strong desire to
remain in the organisation.

Tesco has incorporated the above given factors in the organisation culture to
enhance the employee commitment to the organisation. They are increasing the
employee engagement through various aspects.

Conclusion
In the end, we can say that corporate governance is necessary to set rules and regulation of an
organisation. Good corporate governance provides the incentives to protect the interests of the
company and shareholders, to monitor the value creation and efficient use of resources to provide
transparency of information. Later, the paper has evaluated the leadership practices at Tesco PLC for
motivating the employees and enhancing the group and team performance. Motivation is a key to
success, as employee is the vital resource which should be utilized in a proper way to get
outstanding results. Leadership is the important aspect who can utilize this vital resource through
motivation and proper guidance.