What is this? An independent investigation found out that Tesco overstated its profits by $422 million as a result of accounting errors even before 2013. This means, they were actually incurring losses instead of gaining profits.
Hmm… do you think this is premeditated? If so, then its in fact embezzlement by “management.” Because, hey, an accounting error even before 2013?! That’s a long time! Why wasn’t it detected even after just a quarter or two?
Otherwise, you could also call this severe incompetency which should indeed warrant Chairman Richard Broadbent’s resignation. And so, that is actually what Tesco is doing.. Preparing its leadership transition.
If you were Broadbent, what would you do? And if you’re Tesco?
They say they’re just laying the grounds for the transition alongside fixing the company’s continuity in terms of strategy. Wait. If Tesco was able to detect those accounting errors, do you think they would have been profiting instead of losing money?
If they would have been profiting then continue the strategy. It’s a good one. Otherwise, the accounting error was just like used to hide the elephant. Meaning, the strategy was simply not that flexible to adapt to the changing environments. Broadbent and his strategists should quit.
The author says the Board should go deeper into this. There could be other holes they need to plug. After all, a longstanding error of such kind is pretty unusual.
What’s your take?