Tesco names former FD as chairman despite Higgs

Tesco flouted the Higgs report on non-executive directors yesterday when it named long-standing board member David Reid as its new chairman. He will take over from John Gardiner when he retires in March next year.

Mr Reid, 56, is currently Tesco's deputy chairman and was finance director for 12 years between 1985 and 1997. He has been on the board for 18 years. As such he fails the "test of independence" laid out in the Higgs report. This specifies that non-executive directors would not be deemed independent if they have served on the board for more than 10 years.

However, Tesco said it had consulted major shareholders about the move while shareholding bodies were sanguine about it. "If Higgs is going to end up being all about box-ticking then we're all in trouble," Peter Montagnon, the head of investment affairs at the Association of British Insurers, said.

Defending the appointment Tesco said: "It's certainly Higgs-compliant in terms of either it's comply or explain. David is moving across from an executive role but not from being chief executive, which was what Higgs was really worried about. We have planned the succession of David Reid, he has the full support of the board, we have involved external advice and we have talked to some of top shareholders and they're reaction has been positive."

Tesco has sought to comply with the Higgs report by naming a new deputy chairman who will also be the board's senior non-executive director. He is Rodney Chase, the former deputy chief executive at oil giant BP. Mr Chase joined the Tesco board last year.

The National Association of Pension Funds said: "They seem to have gone through the right process and it is welcome that they have set out this process. It is probably a useful pattern to follow."