This report aims to analyse Clive Peeter Limited’s annual report 2009 and identify the Company’s compliance and non-compliance with Australian Stock Exchange (ASX) Corporate Governance Principles and Recommendations and identify relevant areas for audit, such as related parties, going concern, and subsequent events of the Company.
Clive Peeters Limited is a retailer of electrical and gas appliances, bathroom ware and computer products with a strong brand image in Victoria, Queensland, Tasmania and Western Australia. The Company is committed to providing an extensive range of products to customers at competitive pricing and with exceptional customer service. Trading as Clive Peeters in Victoria, Queensland, New South Wales and Tasmania, and as Rick Hart in Western Australia, the Company employs more than 1,300 staff and has 44 stores throughout Australia (Clive Peeters Limited Annual Report 2009). Clive Peeters Limited (CPR) has been listed on the Australian Stock Exchange (ASX) since September 2005 (InvestSMART 2010).
Compliance and non-compliance with Corporate Governance Principles and Recommendations
Compliance with Corporate Governance Principles and Recommendations Corporate Governance arrangements of Clive Peeters Limited comply with 7 out of 8 Principles and Recommendations set by ASX Council (Appendix 1).
Non-compliance with Corporate Governance Principles and Recommendations Clive Peeters Limited does not comply with Recommendation 2.1 that requires independent directors to constitute a majority of the Board. The Company acknowledges that only half of the Board are independent directors (Clive Peeters Limited Annual Report 2009). They considers that this is appropriate and does not prevent the Board from performing their duties in the best interests of shareholders, because of the professionalism of both independent and non-independent Directors (Appendix 2).
One of the criteria set by the ASX Council to determine the independent status of a director is whether the director has substantial company shareholdings. Table 1 shows that Brian Pollock, Geoff Webb and John Ries do not hold substantial shareholdings in the company and are therefore, independent directors. The remaining directors are considered as non-independent directors due to their substantial shareholdings.
Directors’ Shareholdings of Clive Peeters Limited
|Director |Fully paid ordinary shares |Executive share options | |Brian Pollock |- |- | |Gregory Smith |41,743,974 |- | |Peter Lord |41,615,000 |- | |Rick Hart |2,178,000 |- | |Geoff Webb |50,000 |- | |John Ries |438,000 |- |
Table 1: Directors’ Shareholdings (Clive Peeters Limited Annual Report 2009, p.40)
Impact of non-compliance with Corporate Governance Principles and Recommendations on Audit External auditors may be required to ensure that the entity is in compliance with any relevant legislation and regulations depending on its jurisdiction (Leung et all. 2009). Although external auditors do not have a direct responsibility to provide an opinion on the effectiveness of corporate governance practice of an entity, the auditor’s opinion will affect, to some extent, the investor’s judgment on the company’s overall performance.
The majority of Board’s directors of Clive Peeters Limited are not independent so auditors may need to reassess whether the decisions or judgments of the Board are...