The fallout from the revelation that Tesco had been overstating their profits continues to be immense.
Whilst the investigation undertaken by the Serious Fraud Office will take a considerable time to complete some shareholders have already decided to instigate legal proceedings over the £263 million overstatement of profits which led to significant shareholder losses. Not least of which included Tesco employees who bought into the company’s share scheme and have seen the value of their investment drop by 50% in the past year.
The components of this story are the usual suspects, loose governance, directors preoccupied with their own bonus structure, Auditors not getting to grips with the fundamental issues of the business they are auditing.
Meantime the UK’s top financial regulator (FCA) has launched an investigation into whether Tesco broke rules on adequate financial disclosure and it will
The figures are wrong through incompetence or deliberate falsification it can only be one of these two issues.
In smaller companies it is not unusual for management under pressure to resort to “massaging the figures” whilst unacceptable business practice it does not have the implications that accompany the Tesco situation.
The damage to shareholder confidence and the brand itself is incalculable coming at a time when Tesco is facing rapidly declining sales.
It will be difficult to rebuild trust from either the market of its customers with the overhanging feeling that there may well be more skeletons lurking in the cupboard.
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