Tesco has named John Allan, as its new chairman.
Mr Allan replaces Sir Richard Broadbent, who announced he would step down after Tesco uncovered a £263m accounting scandal last September.
The Tesco board voted unanimously in favour of Mr Allan in what is thought to have been a straight fight with Archie Norman, the chairman of ITV and former boss of Tesco’s rival Asda.
The appointment of a new chairman is one of the final parts of Tesco’s turnaround plan, which is designed to reverse a slump in sales and profits. Dave Lewis arrived as the new chief executive last September and has lowered prices, closed stores and is cutting up to 10,000 jobs.
Tesco shareholders had been calling for more retail experience on the board. Mr Allan spent eight years at former supermarket chain Fine Fare in the 1970s and 80s and was the chairman of Dixons Retail for five years before its merger with Carphone Warehouse last year. He was also chief executive of logistics group Exel.
Patrick Cescau, the senior independent director who led the search of the new chairman, said: “Following a deep and thorough process run by a committee of independent non-executive directors, the board unanimously agreed that John Allan was the right candidate to chair Tesco at this important time.
“On behalf of the board I would like to thank Richard for his work as chairman. He has served the business with unflinching commitment through a period of unprecedented change, and put in place a new senior leadership team for the next stage of Tesco’s development.”
Mr Allan said he was “very pleased to be taking on this role at such a critical moment for the business”.
He will join Tesco on March 1 and be paid £650,000, more than Sir Richard’s £625,000. He will resign from his role as non-executive director at Dixons Carphone and Royal Mail, and has stepped down from his position as a senior adviser to Alix Partners with immediate effect. He will continue as chairman of Barratt and WorldPay.
Tesco confirmed Mr Allan as its new chairman on the day one of the best-known fund managers in the City accused the company of offering a “reward for failure” by making a £2.1m payout to former executives.
Tesco made the termination payments to Philip Clarke and Laurie McIlwee, the chief executive and finance director who left last year. The company initially withheld the payment after the accounting scandal emerged, but admitted earlier this month that it had no legal grounds to do so.
However, the head of corporate governance at Old Mutual Global Investors has criticised the payment and called on companies to install shorter notice periods on executives contracts. Old Mutual’s key fund manager is Richard Buxton, who told the Telegraph last week that he has bought Tesco shares for the first time in five years.
Paul Emerton, head of UK stewardship and governance at Old Mutual said: “The recent announcement by Tesco that its former CEO and CFO would receive termination payments of £1.21m and £0.97m, respectively, provided further evidence that the UK-executive-director standard service contracts based on a 12-month notice period offer a reward for failure.
“As Tesco management noted, in the absence of gross misconduct by either individual, these are contractual payments which the company is obliged to make. However, the performance of Tesco over recent years, combined with the investigation regarding accounting revealed last year, make a total payment of more than £2m inappropriate and show 12-month contracts to be an anachronism.
“In light of this, Old Mutual Global Investors has reviewed the application of our policy on governance and voting. We expect that any service contracts for main board directors at UK-listed companies in existence from March 2016 will have notice periods – and consequential compensatory payments – of substantially shorter than 12 months.
“There may be exceptions where salaries and compensatory arrangements are at particularly low levels but otherwise, it will be difficult to support – and we would therefore generally vote against – the remuneration arrangements of companies who do not meet our required standard, particularly when we vote at company general meetings.”