Ross stores incorporation and it’s corporate Governance
Ross stores incorporation is one of the top companies in America and operates in the retail industry. The company headquarter is located in Dublin California and is listed in an S&P500, fortune 500, as well as Nasdaq 100 in the world. The evaluation of Ross stores is structured in various forms of management which consist of the disclosure, equitable treatment, the rights of shareholders, and the board of directors. Ross stores did not meet all of these categories of corporate governance. Furthermore, the company obtained a total score of 79 with the areas which performed highly consist of equal treatment of shareholders, the role of stakeholders and the disclosure of transparency. The board of governors and the rights of stakeholders are some of the areas which recorded the poorest performance from the score toolkit in the survey. The reason why the board of governor presented a poor performance is because the company does not specify various aspect such as the length of service. They should always have a specific time frame of serving the company because it is always a norm for most companies to take one year.
The rights of stakeholders should also be put into consideration by Ross stores because of its poor performance. The reason for this is because the company should engage the members to participate through the activities of the company especially during the annual meetings to assist in evaluating the corporate governance system. The disclosure and transparency has the highest performance because it focuses on accountability of the corporate governance with the aim of improving the operational process of the company.
Ross Company is one of the departmental store’s companies, which was first opened in the 1950s. The organization operates officially under the brand name “Ross Dress for Less” within its stores. The mission of the company is to commit to creating value to their associates and the surrounding community with a high level of integrity and ethics. The objective of the organization is also to fulfill the mission of offering the customers with the best brand name bargains (Ross Stores, Inc.). This is to empower the associates to operate in ways that minimize the impacts of the environment to give back to the community where they work. The vision statement of the company, on the other hand, is to address various variables to their esteemed customers. These consist of respect, growth, humility, accountability, collaboration, integrity, compassion and authenticity.
The financial information of the company is reported to have earnings per share in the third quarter of 2018 to be $91 with the net earning growing to$338 million up for a previous $274 in the prior year. Primarily, these sales indicate a rise of about 7% to $3.5 billion. The valuation ratios in regards to the P/E ratio (TTT) are valued at 23.24 and the price to sale ration at about 23.31 (Bloomberg Inc.). The profitability ratio under the gross margin of the company is 28.67 and operating margin of 13.99 with an average of the last five years of being at 13.8.
The Written Report on CG Survey Results
The Corporate Governance survey result entails various elements, which are used to determine the effectiveness of the company management. The survey develops categories discussion are reported as below
Category I. The rights of stakeholders and key ownership
The Corporate Governance of Ross stores have implemented the system which recognizes the ownership rights of all the stakeholders. The importance of this is to understand the rights to be protected which consist of monitoring and participating in decision making at the GSM. The company also allows for members to vote when attending shareholders meeting. However, the result of the score recorded the percentage due to lack of the company to adopt a written policy and procedure that can be used to extend a pre-emptive right in connection to offering shares in a private placement to new investors.
Category II.the equal treatment of shareholders
Equal treatment of shareholders has been demonstrated by the company through the analysis of the survey. The members have the right to vote and protection where the interests of each of them are protected by law. Besides the shareholders also have the opportunities to exercise their rights effectively regardless of their violation of these rights. As a result, this category has achieved scores of 7% with little issues experienced. The minority shareholders do not have the equal rights of protection from the abuse of actions from the interest controlled by more substantial shareholders.
Category III the role of stakeholders
The stakeholders have the role of deciding on the management of the company, participation in the voting process during the meetings of GSM. Besides, they also must monitor register and attend the shareholders meeting. However, there are some responsibilities which have not been stipulated by the company to the stakeholders. Primarily this is the factors which have to reduce the scores for this category, and it describes that the shareholder does not have the right to act against the BOD to protect their rights.
Category IV disclosure and transparency
The framework of corporate governance has an effective approach in which it can address and promote the provision of analysis where it discloses the materials financial and business transactions with the stakeholders. Additionally, the quality of disclosed information is also prepared for the stakeholders in accordance with the standards of accounting financial and non-financial disclosure. The significance of this is to improve the ability of investors to monitor the company reliability and comparability of reporting the performance.
Category V. the responsibilities of the Board of Directors
The board of directors is considered to be the executive members of the corporate governance and is responsible for representing the interest of the organization either indirect or direct. The members of BOD are elected every annual meeting to represent the interest of shareholders in the operations of the company. The efficiency the members of the board of directors are indicated when they meet the minimum qualification requirements for competency and skis to make the operation of the company. The responsibilities of the BOD are fulfilled accordingly considering the analysis from the survey making it record a score of 32%.
Below are the figure and charts describing the scores
Ross stores Incorporation has a well-established corporate governance practice that stipulates the policies developed according to the highest standards of integrity. The focus of their mission is to cover the governing principles and expectations in regards to ethics to achieve their goals in the business market. Therefore, the SWOT analysis of corporate governance is essential to determine the success of its operation. The strength of the corporate governance of Ross stores is based on the initiatives made regarding the internal strategies and their factors. The board has ensured that the firm thrives through its market place by helping it to protect the market share through providing a robust free cash flow to the management with the aim of expanding its operations (Serrano Maldonado 25). Besides, the provision of strong free cash flow has been enabled through the successful track record of monitoring the use and sources of finance.
The weakness of corporate governance of the company, on the other hand, focuses on areas where the management needs to improve upon. The board of management has not ensured proper financial planning to meet the industrial operations. This is evident from the survey under the category of disclosure and transparency and its score. There are gaps and inefficiency in the use of finance, which is indicated through its current asset ratio and liquid asset ratios that suggest that the company can use its financial ratios more than it is doing in the present situation. The opportunities of the corporate governance of Ross stores are the ability to have a distinction of the board of management in regards to their duties. The purpose of this can assist in visualizing the need to incorporate new trends, such as capturing new customers through initiating corporate social responsibility (Serrano Maldonado 25). This attracts the customers since the company shows their commitment not only to make a profit but also to give back to the community. The company can also strategize its operations through understanding any new taxation policies to significantly impact their way of doing business by opening up new opportunities at the Ross stores to increase their profitability.
The threats that face the corporate governance of Ross Company relates to its strategic management and the relationship with government policy and regulations. Primarily, the government can implement the laws that influence the operations of the company that can expose the firm to various liability claims due to the change of policies in the market. The other form of threat that the company may face is the development of new technologies from the competitors (Serrano Maldonado 30). This can influence the operations of the company because its goals are often based on future and long-term objectives. Therefore, understanding its relevance can assist the company in meeting its demands and become one of the best in the industry.
Findings and Conclusions
The following is a summary table for the results and discussion of SWOT.
|The strength of the CG||The successful integration of strong free cash flow to the necessary resources for the company’s expansion. This has provided an opportunity for the company to expand its projects due to the availability of resources. Similarly, it has also improved the level of customer satisfaction due to the provision of offers and quality products in the market.|
|Weaknesses of CG||Poor financial planning by the company considering the profitability ratio and net contribution being below the industry average.|
|Opportunities for CG||The distinction of the board of governors in regards to their duties and the company. This has given the managers to determine new channels of attracting customers, such as the establishment of an online platform in the company.|
|Threats of CG||The development of government regulations and policies is one of the risks the company can face. This is due to the existence of several companies, which the government needs to track their operational activities. In turn, it may influence or expose various claims, such as liabilities due to the changes in the market.|
The corporate governance of the company in regards to its background indicates improvements in its operations. The financial reports have shown a rise of nearly 7% of profitability in the last quarter of 2018, which signifies proper and efficient management of the company. Some factors have contributed to this improvement in the control of corporate governance. These consist of the accountability of the board of directors through their respective responsibility to ensure the success of the company. Besides the development and role of business partners through initiating viable opportunities has also been significant to improve the performance of the company.
The findings, especially from the corporate governance score result, are also imperative to understand. The result indicates that the company obtained a significant score in general performance. This is because it managed above average performance, which demonstrates the commitment of the involved parties in the management of the company. The highest specific performance was on the role of stakeholders. However, it also determined that the company has not upheld the rights of shareholders and critical ownership as well as the responsibility of the board of governance effectively. This is determined by the low record from the scores of the result. The aspect of upholding the rights of shareholders has not been fully integrated because the company has not adopted the written prohibitions introducing and making considerations on the topics that are not previously disclosed in the agenda.
Therefore, it is recommended that the company ensure that the rights of the shareholders are upheld at all times to ensure transparency in the management of the business. The importance of transparency in management assists in enhancing the prest to safeguard the rights of shareholders is conducted in a fair manner. The responsibility of the board of governance should also be put into consideration under corporate governance to ensure a higher level of independence when it comes to the provision of duties and responsibilities, which do not affect the internal operations of the company.
San Jose, Alyssa L., and Keith E. Nelson Corporate Governance Diagnostic Toolkit
For Listed Companies. V.11, no.15. 2016, pp. 1-8
Bloomberg Inc, “Specialty Retail”Company Overview of Ross Stores, Inc (2019)
https://www.bloomberg.com/research/stocks/private/people.asp?privcapId=33926. Accessed 26 Feb 2019.
Ross Stores, Inc. “Ross Corporate – Overview.” Ross Dress for Less, 2019, http://phx.corporate-ir.net/phoenix.zhtml?c=64847&p=irol-irhome. Accessed 26 Feb 2019.
Serrano Maldonado, Roberto Esteban. “Ross Stores Inc. Informe de la industrial, “2015, pp.1-40.
The financial information of Ross stores.
- Valuation Ratios
|P/E Ratio (TTM)||23.24|
|P/E High-last 5yrs||23.7|
|P/E Low -last 5yrs||17.5|
- The profitability ratios
|The gross margin (TTM)||28.67|
|The gross margin -5yrs avg||28.43|
|EBITD margin (TTM)||16.21|
|EBITD -5YR avg||16.00|