Tesco worst in FTSE 100 for corporate governance: IOD
Tesco has been ranked worst for corporate governance among FTSE 100 companies, according to a report published by the Institute of Directors (IOD). The supermarket’s low score was due to profit warnings and practices connected to an accounting scandal. Berkeley, the London housebuilder which is set to fall out of the FTSE 100, was second to bottom, while the largest global advertising company, WPP, was ranked 96th and Rolls-Royce 93rd. British American Tobacco came first, with Next, Royal Mail, and Unilever also in the top 10. The IOD warned that companies need to improve governance in order to avoid regulation.
Tesco, WPP and Berkeley Group are among the lowest-ranked companies for corporate governance according to a report released as companies are facing pressure to rein in runaway pay and show commitment to wider society.

The Institute of Directors (IoD), which published the report, warned companies to improve how they are run after a year in which excessive pay for bosses and a string of scandals has once again battered the reputation of corporate Britain.

Tesco came bottom of the rankings of FTSE 100 companies. The supermarket chain was brought down by the lowest scores for accounting and audit practices that were largely a hangover from an accounting scandal and a series of profit warnings in the past two years.

WPP, the world’s biggest advertising company, was ranked 96. Its weak point was pay after the company handed its founder and chief executive Sir Martin Sorrell £70m for last year, prompting a third of shareholders to oppose one of Britain’s biggest paydays at WPP’s annual general meeting in June.

Berkeley, the upmarket London housebuilder, was 99th due to weak board effectiveness and low scores on pay and shareholder relations. The company, which is due to drop out of the FTSE 100, paid founder and chairman Tony Pidgley £21.5m for 2015 after awarding him £23.3m the year before. But fewer than 13% of shareholders voted against the pay report at Tuesday’s AGM.

Rolls-Royce, once one of Britain’s most respected companies, was also rated a lowly 93rd after a series of profit warnings and allegations of illegal payments that are under investigation by the Serious Fraud Office.

Corporate governance – how companies and boards operate and deal with shareholders, workers and customers – has shot up the political agenda amid disquiet about inequality and remote business elites.

Big shareholders, under pressure to take a stand, rebelled over pay at AGMs this year including a majority vote against the £14m deal for BP’s chief executive Bob Dudley.

Theresa May has promised to rein back executive pay and has threatened to place workers on boards to make companies act in the interests of society and the economy. City institutions and business people have admitted the gap between those at the top and the rest of the populace contributed to the vote for Brexit.



Oliver Parry, head of corporate governance policy at the IoD, said: “Companies need to own this now. You have got to get to grips with your corporate governance because if you don’t then policymakers will regulate you more.

“We are saying to companies: ‘You have still got an opportunity to sort it out for yourselves.’”



The IoD released its report as Sports Direct prepared to face angry shareholders at its AGM on Wednesday. The Guardian’s investigation into working practices at the company added to existing concerns about its corporate governance and the dominance of founder and majority owner Mike Ashley.

The resulting slide in the company’s shares caused Sports Direct to fall out of the FTSE 100 list of Britain’s most valuable companies in March, excluding it from the IoD’s list. On Tuesday Sports Direct tried to win over shareholders by promising a governance review by a City law firm.

The IoD’s survey rated companies on board effectiveness, audit and risk, pay, and relations with shareholders and other stakeholders. It also factored in the opinion of its members – company secretaries, accountants and other groups – about companies’ governance.



The highest ranked company was British American Tobacco (BAT), whose top score on governance measures held up against a relatively low perception ranking of 42. Others in the overall top 10 included Unilever, Next and Royal Mail.

Parry said BAT’s perception score was low because tobacco companies have a bad reputation and it showed companies need to do better at behaving well and getting their message across.

The IoD, which has 34,500 members, has traditionally been to the right of its rival the Confederation of British Industry (CBI), but it has been a fierce critic of high pay and unaccountable bosses – which, it argues, threaten the legitimacy of capitalism.

The report was the IoD’s second annual survey into corporate governance. Last year Britain’s banks were all in the bottom 20 along with Sports Direct. This year Barclays was the only bank in the bottom 20 though banks did badly in the perception survey.