Tesco class action lawsuit is a rather unclassy affair

Tesco Warehouse

Hands up who wants to sue Tesco? If that sounds like fun, and if you were a Tesco shareholder last September, a US legal outfit called Scott + Scott wants to hear from you.

It says the supermarket chain’s £263m overstatement of profits last year caused “a permanent destruction of value to shareholders”. It thinks compensation is due – lots of it. It’s talking 50p to 70p per share, which is roughly £5bn.

What a load of nonsense. Or, more politely, this intended claim is an import from American litigation culture that we could happily live without. There are at least three reasons why sensible Tesco shareholders should tell Scott + Scott to find other ways to chase fees.

First, shareholders own Tesco, so they would, in effect, be making a claim against themselves. In practice, of course, life doesn’t work so simply. One set of shareholders – the litigiously minded – would be hoping to benefit at others’ expense. That is unfair.

Second, how does one measure “a permanent destruction of value”? Tesco’s share price is 20% higher today than it was on the day the company confessed to the overstatement. Of course, it might have been higher still if profits had been stated accurately in the first place. But how can one hope to separate a permanent and a temporary loss of value? It’s impossible.

Third, the appropriate bodies to investigate a profit overstatement by a major quoted company are the Serious Fraud Office and the Financial Reporting Council. Both are on the job and their findings are awaited eagerly, not least by Tesco’s former bosses and its auditors.

In the meantime, Tesco shareholders should take a stand against litigation creep. There will be times when it is right to sue companies that have made serious accounting mistakes. This is not one.

Remarkable? No

“The rate of change that we have seen in FTSE 100 companies over the last four years has been remarkable,” says Lord Davies, the government’s champion of women on boards.

A near-doubling, to 23.5%, in women’s representation is indeed worth cheering. But “remarkable” is overdoing it. Davies’ own target, set in his 2011 report, was 25% by 2015. In other words, his theoretical deadline for one-quarter representation passed three months ago, which is not quite so impressive. Still, the target should be met this year, which is perhaps the main thing.

But the idea that the rest of the corporate world would follow the FTSE 100 firms’ lead must also be viewed as a work in progress. Among the biggest companies, the percentage of women in executive roles has risen from 5.5% to 8.6% since 2011; but among the medium-sized FTSE 250 companies, the ratio is unchanged at 4.6%.

Indeed, almost one in 10 FTSE 250 firms do not have a women on their board in either an executive of non-executive role. There are still a lot of corporate laggards out there. There is progress but the rate of improvement could have – and should have – been faster.

Funny thing, franchises

Infrequent observers of the French DIY scene may have assumed that Mr Bricolage was already hard at work for Kingfisher. The B&Q owner announced the purchase of the chain almost exactly a year ago. That would seem to leave plenty of time to square the local competition regulators and get a modest €275m (£200m) deal over the line.

Apparently not. Kingfisher’s strange statement on Tuesday said the board of Mr Bricolage plus 42% shareholder ANPF, which holds the franchisees’ interests, “have reservations in relation to the transaction”. It’s a bit late to develop cold feet, surely. This was supposed to be a binding deal subject only to competition clearance, which doesn’t seem to be the problem.

Neither side is saying (yet) what the “reservations” are, so definitive judgments will have to wait. But Mr Bricolage is mainly a franchise operation. If franchisees really don’t fancy a change of ownership, new Kingfisher chief executive Véronique Laury will have to think carefully about trying to cajole them.

A volunteer is worth two pressed men, they say, and an enthusiastic franchisee is worth more than a reluctant one.

Election energy

Do you want to be holding Centrica shares on 8 May? asks Deutsche Bank. Its answer is no if there is a Labour government. That’s hardly a revelation given that Ed Miliband has proposed cutting retail energy prices by 10%.

But Deutsche’s valuation gap is still eye-catching. It reckons the owner of British Gas could be worth 20% less under a Labour-led government than a Conservative one. And under an “aggressive” Labour government, the downside for Centrica could be 40%.

Make up your own mind whether these estimates are accurate. But there is an underlying point here: stock market investors don’t seem to be talking about the election yet. It’s very odd.

Powered by Guardian.co.ukThis article was written by Nils Pratley, for The Guardian on Tuesday 24th March 2015 20.05 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010


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