Tag Archives: Rebecca Shelley

February 6, 2015 · 00:14

A basket full of trash

Have you ever had this? I am not talking about the Christmas or the hospital basket. No, I am talking about those ‘greeting’ baskets you get. One of these: ‘welcome new member’ baskets. You accept them with a smile, whilst you know you are getting a bag full of goodies that have value that is close to zero. Now we get these baskets from book clubs and other longer term commitment places, none of this is a big mystery to many people, because at some point, we all get confronted with this basket. Now, let’s change the game a little, now we consider the same basket, but in this case we don’t look at some two bit online retail vendor, now we look at Price Waterhouse Coopers.

That part is seen in the Guardian as per today. Let me refresh you on some of the facts, for that I will take you back to my blog from October 25^th 2014 called ‘Price Waterfall Blooper‘. In there I wrote the following “Consider that PwC had (a reported by the Guardian in an earlier blog) last year; PwC was paid £10.4m by Tesco for its auditing services and a further £3.6m for other consultancy work (a newer version at http://www.theguardian.com/commentisfree/2014/oct/23/guardian-view-tesco-auditing-debacle-pwc-systemic-shambles)“. Now when we add today’s information, information I quite honestly never considered: “The Groceries Code Adjudicator, Christine Tacon, announced the move, saying she had formed a “reasonable suspicion” that the retailer has breached the Groceries Supply Code of Practice“. Now, let’s take a quick look at this so called ‘code of practice’. First of all, the information is found here: https://www.gov.uk/government/publications/groceries-supply-code-of-practice. The fact that this is on a dot Gov dot UK site should indicate that this is the serious stuff. So this code of conduct states at 4.1 PART 4—PRICES AND PAYMENTS, the following: 5. No delay in Payments and at 9. We see Limited circumstances for Payments as a condition of being a Supplier. This is just two of a long list of a code of conduct. The reason to mention these two is the question that follows. ‘How come the auditor was not aware of these facts?’. These are not just simple facts, they are codes of conduct, and can someone please explain to me how this is not raised by the firm charging close to 14 million pounds for one year of work? There are two other parties who are about to see the limelight. Party one is the Press. You see, I was following part of this since last year October, yet, I do not remember seeing the press being awake on these facts. I have a decent excuse living on the other side of the planet and the fact that these elements are not part of my Master of Intellectual Property education, yet the press, Pricewaterhouse Coopers as well as whatever legal aid is out there in UK farmland, it seems to me that too many people were not paying attention at all. There is actually a third side to this. I missed it initially, but when you look at the Guardian on October 23rd (at http://www.theguardian.com/business/2014/oct/23/tesco-black-day-profits-down-92), we see the following: “Tesco claimed that the rogue accounting practices – which relate to how the supermarket banks payments from suppliers – dated back at least two years“. Now consider again the government side that states ‘Guidance Groceries Supply Code of Practice, Published 4 August 2009’, so the statement and the fact that there was a code of conduct out for half a decade, did no one consider that there were additional issues that might rise?

Who on earth is running PwC in London? More important, what on earth is mentoring these wannabe’s? I have good right to speak in this manner. This took me 5 minutes to figure out when I got wind of this small fact, the fact that PwC, the Press and others were not all over this from day one is a little too weird for words. Consider the people that quickly left Tesco when the water got slightly too uncomfortable. Should they have known? I’ll let you answer this question for yourself, but now also consider that the auditors did not make mention in reports on some of these parts, they DEFINITELY should have known about the codes of conduct for the simple reason that part of this is linked to the pesky rules regarding payments and so on. What else did these people miss? More important, consider the date I mentioned (October 23^rd), now consider the Deloitte report, was this part in that report? If not, consider that they had to check on these ‘miscalculations’, as we see the mention ‘rogue accounting practices‘ and ‘payments from suppliers‘, did no one consider looking under rock number two? Granted that Deloitte did not get much time, but as we see that suppliers were part of the mix, did no one mention the question ‘What about the Groceries Supply Code of Practice? Do we need to consider any issues there?‘ Did that question seriously not come up?

Now consider my blog from October 13^th called ‘A matter of Jurisprudence‘, there I wrote the following “company secretary Jonathan Lloyd, who advises the board on legal and governance issues, had resigned and was serving out his notice until March 2015”, the second one “Ken Hanna, chairman of Tesco’s audit committee, is also set to step aside as a non-executive director as the company’s chairman reshuffles his management team”, which was shown from several sources. Now consider the fact that we see Jonathan on legal issues and Ken as part of the audit committee, they should have known about the ‘Groceries Supply Code of Practice’, which now gives an entirely different light into their departures. So was PwC completely in the dark about this? If the answer is yes, then my next question should be ‘why are they allowed to be auditors?’ Is that such a weird question to ask? It is a code of practice, not a fraternity paper on how to score, so I reckon, especially as it has financial sides, the auditors should have taken a look, moreover, Deloitte should (they might) have reported on this. The fact that the press is only now revealing these events calls for additional questions, but their fumbling is not part of this article, the fumbling of accountancy firms a lot more, for the mere reason that the code states at 5. “A Retailer must pay a Supplier for Groceries delivered to that Retailer’s specification in accordance with the relevant Supply Agreement, and, in any case, within a reasonable time after the date of the Supplier’s invoice“, which should have been part of the financial checks, can we all agree on that part?

And as we take a better look at this basket (have you figured it out yet), we see that the players were in a lot deeper than initially suggested. This cesto, has harboured information, misinformation and above all else, a lack of illumination of the facts as is. First there is Tesco themselves, the latest information shines a harsh light on several members who have vacated their office, in addition there is the case I made on October 13^th in my blog ‘A matter of Jurisprudence‘, where I mentioned one person (Rebecca Shelley) who would have been at the centre. The mention on the Birchwood Knight site was “As part of her corporate affairs role, Rebecca will be responsible for government and media relations, investor relations, internal communications and corporate social responsibility“. Rebecca’s job hits ‘government relations’ and ‘social responsibility’. How come that this ‘Groceries Supply Code of Practice’ remained so below the radar?

So when we see months of reporting and we see the lack of mention of this so called ‘code of practice’ we also see the mention in today’s article “Business secretary Vince Cable said: “This is an historic day for the groceries code adjudicator and shows we have created a regulator that has real teeth“. Who is this Vince Cable catering for? You see, if this statement had been given before December 1^st 2014, then there might have been a case, at present the act of mentioning it months after going live is just another presentation of a sad story on how some people could be seen by many others as some parties remaining silent hoping to make a bundle down the track.

So I reckon that Tesco will have to sweat the small stuff for some time to come, however, the more we get to see at present, the less clean the image of PwC seems to be. In the case of PwC it will become a case that is worrying on several levels. Not only are the looking for hardship over what was done, as per now it seems that PwC will be scrutinised for the things they did not do, not properly oversee or missed altogether, as per today it sucks to be the senior account holder of the Tesco account, because the fallout will continue for a decently long time to come.

So as we see the basket (also known as a cesto) filled with the trash of information, wrongful acts and none acts, can we all agree that we got a whole lot of nothing, an act that will have severe repercussions and not just legal ones! Does anyone remember this Warren Buffett fellow and how he lost 2 billion in value? If we combine what we have seen so far and add the part that I discussed in October regarding the Chadbourne papers, I can repeat that quote: “that directors of companies must make certain disclosure statements in the directors’ reports. This applies not only to information which the officer actually knew of but also information he would have known about if he had conducted a reasonable enquiry. However, the provision goes further and requires the director to confirm that, so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware”. This now brings an entirely different light to the Groceries Supply Code of Practice, moreover, it could be suggested that Warren Buffett now has a clear case in legally reclaiming his losses, consider that the US has the Sarbanes–Oxley Act, after Enron, which took care of the power players real fast. The UK has the Corporate Governance Code. I reckon that it is not too far-fetched that Mr Warren Buffett could be offered a deal for his lost two billion. If so Warren, remember this poor blogger and I feel so much better getting to work in a new Jaguar XK, in British racing green of course.

A matter of Jurisprudence

Another morning, another moment we see another round of iterated news. Just now I noticed another article placed 5 hours ago (5 hours after my previous blog) on how 2 more senior directors are moving out. The first one “company secretary Jonathan Lloyd, who advises the board on legal and governance issues, had resigned and was serving out his notice until March 2015“, the second one “Ken Hanna, chairman of Tesco’s audit committee, is also set to step aside as a non-executive director as the company’s chairman reshuffles his management team“. The news was in more than just one source. The quote “‘His resignation is not connected to the current investigation. It’s his own choice; he’s got a new job with another listed company,’ a Tesco spokesman said“. All this might be true, but let us be fair, if it was not HIS choice, would we hear this from either Jonathan Lloyd or Tesco?

This got me looking into another area. I got the impulse after seeing a PDF (at http://www.chadbourne.com/files/upload/dandoliability.pdf).

In there we see the following under the title ‘General Duties of Directors under the Act‘, “To promote the success of the company for the benefit of its members having consideration to: (a) the likely consequences of any decision in the long term” as well as what we see at 3.5 under Common Law Duties, where we see “At common law, a director is obliged to exercise a reasonable degree of skill and care in carrying out his/her duties. The standard of care involves both an objective and subjective element”. In other words, the director is required to exercise that degree of skill which might be expected from someone having both: ‘his own particular knowledge and experience‘ as well as ‘the general knowledge and experience which might be expected of a person carrying out the same functions as those carried out by that particular director‘.

For those who kept their eyes on my blog articles on Tesco, are you seeing the issues that are now in my mind?

I talked about negligence on several moments, I iterated parts of these and wondered about several questions, especially the fact that the press has been lacking in digging into these matters. Now a simple Google search led me to the PDF by Chadbourne & Parke. The Guardian could have had decent insight a mere 23 minutes by bus away (a little over 3 miles), so why does it take a non-journalist from the other side of the planet to connect the dots?

The PDF is a mere information piece, perhaps a little advertisement and it states that you needs proper legal advice, yet, not one paper has been digging into that pile have they? I did not get my law degree in the UK, yet I do get the gist of it, more important, the deeper I dig, the clearer the view seems to become that others are ignoring it. So, are these all just imaginations of conspiracy theory by me the blogger? This is clearly a question the reader might ask themselves. Yet, am I accusing of issues being covered up? I am to some degree, yet at the foundation I am questioning the information I read and I wonder why others, those who should be asking and digging on ‘issues’ are not doing that.

Yet the jewel was in 5.1, where we see “To a large extent, these mainly relate to duties of internal management, e.g. the keeping of accounting records; the preparation of annual accounts; the filing of documents with the Registrar of Companies and the keeping of the statutory books of the company. Failure to perform these duties or to ensure that they are performed may result in fines both for the company and the defaulting directors. Directors may also be subject to imprisonment“, so when we see this does it not seem interesting on how quickly some are leaving the field for a ‘better’ option?

This all brought me to Re D’Jan of London Ltd [1994] 1 BCLC 561. It is a UK Law case and quite the one at that became the main precedent which is now codified under s174 of the Companies Act 2006. “He did not show reasonable diligence when he signed the form. He was therefore in breach of his duty to the company“, how does this relate?

Is it about filling in a form? No, but when we regard s214(4) of the Insolvency Act 1986, we see the same approach as we see in a mere PDF by Chadbourne at 5.1, there is a visible need for “general knowledge, skill and experience“, but how do we see the term general knowledge? You see, the Tesco issues are stated in regards to ‘specific knowledge’, as we see the changes as they had been pushed through before the Dave Lewis change. This all gets me back to Rebecca Shelley at Tesco. First of all, there is no accusation here, there is no indication that she did anything wrong. So why does she pop up on my radar, because she is a woman? No! Tesco has several, some even in higher places then Rebecca. Let’s take a look that I saw on the Birchwood Knight site (at http://www.birchwoodknight.co.uk/news-article/tesco-hires-rebecca-shelley-for-group-director-of-corporate-affairs-role-151).

Here we see the following quote “As part of her corporate affairs role, Rebecca will be responsible for government and media relations, investor relations, internal communications and corporate social responsibility (the legal affairs and other elements of Lucy Neville-Rolfe’s brief are being split into another role)“, am I reading too much into this?

Consider the (former) flying parts of Tesco. When we see the need and the issues involving legal matters, was the revamping of the role as Rebecca Shelley received it a niche part of what should have been? This is where I see ‘general knowledge’ versus ‘specific knowledge’. It is my personal view that Rebecca’s role should be a lot more senior, especially in light of the revelations we see in the papers, am I that wrong? If she had the legal sides to her role, how much earlier might we have seen the overstatement, or the Gulfstream issue for that matter? These issues are in relevance towards the place I am trying to see, places the press does not seem to be looking, the place that readers as well as half a million Tesco employees should be aware of. I will go one step further, as I see the issues in play, as I see the matters of non-transparencies as well as an indicated lack of information towards the shareholders gives reasoning that they might want to evolve the role of Rebecca Shelley to the board. Especially in light of the massive changes Tesco is likely to face.

Yet, legally speaking, there are additional questions when we look at http://www.ibe.org.uk/userassets/briefings/ibe_briefing_31_tax_avoidance_as_an_ethical_issue_for_business.pdf, was the Gulfstream a form of tax avoidance? None of this is illegal, but it comes with ethical questions and as such I wonder how much the shareholders knew or should know. If tax avoidance is avoiding social obligation and as such it could damage public trust and reputation, does the link now make sense? The argument that shareholders want maximised value, which means a minimised taxable footprint, so how are choices made? More important why am I the only one who seems to be asking the questions that have relevance and am I alone digging into this?

One final step regarding the Chadbourne paper, at 6.15 we see “that directors of companies must make certain disclosure statements in the directors’ reports. This applies not only to information which the officer actually knew of but also information he would have known about if he had conducted a reasonable enquiry. However, the provision goes further and requires the director to confirm that, so far as the director is aware, there is no relevant audit information of which the company’s auditors are unaware. A director has a duty to exercise reasonable care, skill and diligence when preparing the directors’ report. In determining a director’s liability under the Act, the statutory test is that a director will commit an offence if he knew the statement was false or was reckless as to whether it was false and failed to take reasonable steps to prevent the report from being approved“, which just raises additional questions. Yet, consider the following in light of all I wrote and quoted about the issues on generic and specific tasks, the issues on “which the officer actually knew of but also information he would have known about if he had conducted a reasonable enquiry” becomes an issue when the board is so niched that reasonable inquiry is no longer an option. It would in my mind place the role of Rebecca Shelley at the centre of it all, yet with the legal part removed we would see a hindrance there too. So as you look at the events that the press wrote about, the parts I wrote about and the questions I have been asking. I mentioned in the early beginning of Tesco regarding orchestration in the article ‘The orchestration has engaged‘, yet I thought it was external, is it possible it had been internal and the involved parties are clearing the field really fast at this point?

But there is one more issue, especially if I want to remain true to the title ‘A matter of Jurisprudence’, s370 Enforcement of directors’ liabilities by shareholder action (as seen in the Companies Act 2006), we see under s370(1)(a) “in the case of a liability of a director of a company to that company, by proceedings brought under this section in the name of the company by an authorised group of its members;” there are a few other issues which give question on how enforceable this would be, yet consider the issues we have seen, what more should be looked at? Consider chapter 6 of the same act ‘Voidness of provisions protecting auditors from liability’, now consider “for exempting an auditor of a company (to any extent) from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company occurring in the course of the audit of accounts”, now we get Pricewaterhouse Coopers in the mix. There is no indication at present that PwC is at fault in any way, yet when we see the issue regarding small change (read 250 million), when we regard that this inflation was not just straight through, but as I see it (a clear assumption) the fact that it required a whistle-blower, indicates that the inflation was decently buried. Was it buried well enough for PwC? That is the question. The implied extra 3 million in consultancy might have been valid, considering the size of Tesco, so where is the negligence? There might not be any at all, but consider that the Tesco executives took PwC for a ride and it was not found and it was signed off on, when THAT becomes visible, what will happen to the value of PwC, if a mere 250 million can topple a 70 billion pound company, what would be the impact on PwC for not finding it?

Perhaps that is a conspiracy theory, evolving as the facts seem to fit (or fitting the facts as they seemingly evolve), but are they? Even I question that what I find, but I will ask questions none the less, something the press has not been doing in any way, shape or form.

Tesco, the Lehman way

It’s all the buzz
It’s all the rage
What Lehman did once
On a grocery stage

So cabbage that cherry
and settle that sprout
and if you want balance
you’ll fall on your snout

So be not afraid
for them closing the doors
bring coins to Tesco
250 million and it’s yours!

Yes, another day in the works for the CFO’s of the world. Did anyone imagine, when the Lehman brothers had their methods of inflating their economy it would be all the rage. So much so that it would even come to a grocery near you?

Well, as we see the Guardian (at http://www.theguardian.com/business/2014/sep/22/tesco-investigators-overstating-profit-250m) announces how Tesco overestimated their profit. Let’s be honest, 250,000,000 is just a number, if you say it really fast it doesn’t seem like much (you should actually really try to say it fast 5 times).

Now, they will fork out additional costs as they have requested DeLoite and Freshfields to take a look at all this.

It would be nice to bash them ‘board’ members around a little more, but it seems unfair because when we see Dave Lewis and how open he is on what has transpired, we should wonder what comes next. The fact that he was alerted by the CLO only adds to the confusion here. Not confusion in a bad way, but actual confusion. First of all, let’s have a round of applause (seriously!), for Dave Lewis to bring this out into the open. I believe that it will remove pressures and I feel certain that the body blow the stock gave them will settle and likely return, perhaps even a little stronger. We should expect a Chief Legal Officer to act in this way and seeing it so is just a builder of confidence. Yet, I stated confusion, which I remain true to.

Even though these matters are in place and also the fact that the new CFO is not joining them until December 1^st, we should ask what elements were in play with the old CFO leaving. The BBC throws a few more logs on the fire (at http://www.bbc.com/news/business-29306444). There are facts between the emotions of people. When I read “Professor Ajay Bhalla of Cass Business School said ‘things could not be worse for Tesco’s management and shareholders’“. Sounds nice BBC! Was this the only expert you could find willing to speak out? What do the people at the London School of Business say?

I have other questions too. Where were Chris Bush (Managing director UK) and Mike McNamara (CIO)? Did they not notice the 250 million ‘offset’? Let’s not forget that this 250 million pound caper represents 10% of the ENTIRE Tesco Group profit. That is way too large a number to be this unnoticed by too many on the high level. In regards to the CIO questions will also rise on what data was used, how it was collected and how it was ‘mined’ for the ‘information’ nuggets in the end. Be very wary of what I state here. I am not accusing, or considering their involvement or guilt. Yet, if reports are based upon numbers, which comes from data files, how was all this achieved? There is an entire internal track that should be examined and not just by the two fore mentioned ‘guests’ of the Tesco system. The list of the members of the executive committee seems unbalanced as well, we see all these commercial players, marketeers and even a Chief Creative Officer, however on the other end there is only one Chief Information Officer. Where is the CTO? Where is the CDO (Chief Data Officer)? As I see it, when you have your global groceries and your banks, one CIO just does not cut it, you need two more to create a wall to ‘prevent’ these commercial boys (and three girls) into becoming a little too over enthusiastic. Hurray for Dave Lewis (not Dave Allen), for taking the Bull by the horns and acting the right way. The Guardian informs us of a few other interesting choices, but the two parts that did raise a few issues were “He said the problem was not in the ordinary course of events and that rules may have been broken” and “Analysts pressed Tesco’s chairman, Sir Richard Broadbent, about how the accounting problem went undiscovered until just over a week before the planned announcement of first-half results. Clive Black, an analyst at Shore Capital, said Broadbent’s position was untenable because he had left the board without a finance director“.

Was it that simple? You see, the Lehman reference is there for a reason, they did all these naughty things, yet never actually ‘broke’ the law. a better quote in that regard is one I read a little while ago “Just because an action is legal does not always mean that it is ethical“, which is at the heart of this here. There are two sides, not just that Tesco was without a CFO, but this situation implies that those directly below the CFO, who have been there until now (my assumption) is that they either did not know or did not care what was going on. These are questions that clearly need additional investigation. It is also cause for my opposition to Clive Black, the Shore Capital analyst. A good machine should be able to continue running if a head falls away (for whatever reason); if the machine is sound this would not have happened. So as Mr Black looks at one person, it is my personal believe that the machine itself is not up to scrap. This is partially due to the lacking presence of a CTO and a CDO, the last one is essential when you see someone like Tesco, where the grocery and banking branch are now intertwining. That issue will be more and more essential to other areas where larger players are now doing much more, whether it is banking, insurances or mobile communication. The overlap makes the need for a Chief Data Officer more than just essential.

Even though four people have been suspended there is one more person that needs to be looked at. When I say this I mean not as in suspension, but an investigation into her role seems to be essential as well. In this case I am referring to Rebecca Shelley, the Group corporate affairs director. If we look at the Tesco Governance structure where it states “We have two Committees responsible for ensuring that we live up to our commitments and responsibilities. Our Social Responsibility Committee (see below) is led by our Chief Executive, Philip Clarke, and is responsible for driving our strategy and monitoring our progress. Our Corporate Responsibility Committee, which includes Non-executive Directors, defines our corporate and social obligations as a responsible business. As outlined in his introduction to this report, Sir Richard Broadbent has handed over the Chair of this Committee to Jacqueline Tammenoms Bakker“, which is at http://www.tescoplc.com/index.asp?pageid=168. The role of Rebecca Shelley, in my view should have been more central with inclusion in the financial matters as well (perhaps she was). Even though her role would only have been ‘to be aware‘ it is likely that whatever game was played could not have lasted, or remained this hidden if she would have been part of the reporting side. Is that not a corporate affair?

So as we look at what happened and how to stop it, I think it is also important on how things were meant to run and how they should be run in light of the branching of Tesco. It also lights one other aspect. I reckon the outspoken actions of Dave Lewis might be rare, which means that Tesco is not the only one where there has been an issue of overstating. Who else played and how is compartmentalising in these events is a lot more dangerous than people outside and inside the circle regard them to be.

In the end we should all form our own minds on events when they take place and I hope that this blog raised several questions on things some got away with and more important how things can get better when people like Dave Lewis pick up the issues and goes for them, camera’s and image be damned!

Tag Archives: Rebecca Shelley

A basket full of trash

A matter of Jurisprudence

Tesco, the Lehman way

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