The Body Shop has admitted it is breaching the Stock Exchange’s combined code on corporate governance this financial year, a lapse which accountants warn could have serious repercussions on the company’s internal controls, writes Lucinda Kemeny.
The retail chain, often recognised as a leader in areas like environmental reporting, said it was complying with the pre-combined code but had fallen behind due to restructuring.
The company will soon have only one non-executive director, Penny Hughes, when Aldo Papone retires on June 24.
The combined code, introduced last June, stresses the need for a balance on the board to ensure that no one group dominates board decisions. There should also be three non-executive directors sitting on both the audit and remuneration committees. Companies have to adhere to the code or explain to the Stock Exchange why they are not and when they will do so.
Corporate governance specialists have raised concerns that the lack of independent non-executives could have serious repercussions for monitoring internal audit controls as the audit committee is supposed to act as an intermediary between a company and its external auditors, in this case BDO Stoy Hayward.
One Stoys insider said there should be more non-executive directors but remained unconcerned given the company’s commitment to recruit at least two to the board over the next few months.
Angela Bawtree, The Body Shop’s head of investor relations said: ‘We are in a period of transition and this has been an exceptional year. We are looking to recruit shortly but there is a limited pool of people that have the necessary experience.’
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