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Mixed results for WA stocks

THREE Western Australian companies have been given a five-star rating in a national survey of corporate governance practices.

Orbital Engine Corporation, Burswood and Wesfarmers were among just 15 companies nation-wide to receive the top rating.

At the other end of the spectrum, WA companies Dalrymple Resources, Chemeq and AdultShop.com received the bottom one-star rating.

The survey by the University of Newcastle for national accounting firm Horwath analysed the 2001-02 annual reports of Australia’s top 250 listed companies.

It focused on key governance issues such as directors’ independence, auditor conflicts and board committee structures.

The report concludes that: “the top ranked companies have further improved their corporate governance structures while the lesser ranked companies have stood still”.

It says 54 per cent of companies can be described as “good” or “better”, while 30 per cent were found to be lacking in key areas.

Five-star companies “demonstrated unequivocal independence in all key areas, including their board of directors, audit committees, remuneration committees and nomination committees.

“The board and related committees met regularly and disclosure on related party transactions was clear and unambiguous.

“The level of non-audit fees paid to the external auditor was within acceptable parameters.”

The judging criteria closely resembled the principles of good corporate governance issued early this year by the Australian Stock Exchange.

While the principles were not meant to be prescriptive, they have often been applied that way in practise. For instance, the report dismissed the argument that smaller companies do not have the resources or the need for formal corporate governance structures.

“All listed companies irrespective of size have an obligation to ensure that they have the reality and the perception of full transparency and accountability in their corporate governance structures,” it says.

The report cited Chemeq as one of several companies that are “strong on rhetoric but low on action”.

Chemeq company secretary Andrew Dwyer defended the company’s practices, which he said complied with all current requirements, and were appropriate for its stage of development.

“I would challenge anyone to name a better person than Dr Graham Melrose to be our chief executive and chairman,” Mr Dwyer said.

Schaffer Corporation, which was given a two-star rating, has a similar governance structure.

Schaffer’s annual report explained the current approach by stating that: “the board does not believe the board or the company are of sufficient size to warrant the establishment of additional dedicated board committees”.

A key difference between the two companies is that Schaffer’s four-person board has one independent director.

The WA laggards included Dalrymple Resources, which was delisted from the Australian Stock Exchange last month following completion of its merger with LionOre Mining International.

The lowest ranked company in the survey was Melbourne based Sunraysia Television, owner of STW Channel Nine Perth.

“It had few good traits of corporate governance, including the fact that it did not have an audit committee and its board of directors met only four times during the financial year,” the report says.

Sunraysia’s board of directors has just three members and Eva Presser is both chief executive and chairman.

 

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