Below are two made up and abbreviated examples of the 'CEO letter to the shareholders' from the
Question:
Below are two made up and abbreviated examples of the 'CEO letter to the shareholders' from the 2020 annual reports of imaginary US sports goods company Haihai Sports Inc and imaginary German sports goods company Dragomir GMbH.
Haihai Sports Inc. CEO letter to the shareholders 28 February 2021
To our shareholders
Having started as CEO in January, this is my first letter to shareholders of Haihai Sports. What an unprecedented year this has been.
Haihai Sports has remarkable strengths: our connection with consumers; a world-class, talented and increasingly diverse team; a commitment to unrivalled quality and innovation; and a brand that appeals to people all over the world.
For the first three months of 2020, these strengths contributed to strong financial performance. Gross margins and operating income grew. Then the COVID-19 pandemic caused lockdowns in many places all over the world. Non-essential retail stores closed, sports events were cancelled, and people were confined to their homes. The pandemic negatively impacted our financial results during the second quarter. Nevertheless, I am proud of how Haihai Sports has responded to the pandemic, and in the process, Haihai Sports' underlying strengths and resilience have increased.
Our response was led by our values. We focused first on the health and safety of our employees, our consumers, and the communities in which we operate. We provided pay continuity for all employees while facilities remained closed. This year has also deepened my personal commitment to equality for all. Haihai Sports aspires to be a diverse and inclusive company.
Haihai Sports continues to be the most popular brand in most of our key regions. We are strengthening our competitive advantages and setting the foundation for long-term growth as follows.
- Our product innovation will appeal to Haihai Sports consumers.
- Our sales app, and our loyalty and membership programmes will reward our consumers.
- Our dynamic supply chain network and sales app will increase the speed of our sales and delivery.
In sum, I feel confident that Haihai Sports will emerge from this period even stronger and even better positioned to create value for consumers and shareholders.
Thorsten Crest
Haihai Sports Inc. President and CEO
Below is the second letter.
Dragomir GMbH CEO letter to the shareholders 28 February 2021
Dear shareholders,
I hope this letter finds you healthy and well in spite of the challenges 2020 has presented for us all.
We started the year with high expectations because our sales in 2019 had been strong and in January our new product lines were well received. However, in March and April, the COVID-19 pandemic caused lockdowns and retail came to a halt in many places all over the world. In addition, as about 30% of our sourcing comes from China, we needed to focus on securing our supply chain.
We quickly focused on the following three areas.
- The first priority was to deal with COVID: our human resources teams all around the world worked to ensure the safety of our people. I am pleased to report that none of our employees has died of COVID. Two employees were hospitalised, but fortunately, they made a full recovery, and they are back to full-time work. We did not know how long the lockdowns would last, so we needed to secure financing and liquidity and prepare for different lockdown scenarios. Fortunately, a consortium of eight German banks gave us an additional credit line. Although expensive due to above-market interest rates and preferential creditor status, as a safety net, it enabled us to make sound business decisions during this period of high uncertainty. We needed to find solutions for our retail partners (upstream) and the partners in our supply chain (downstream) to minimise order cancellations and job losses. Solutions were found in the form of delayed delivery, extended payment terms, inventory storage in temporary warehouses and so on. We managed to get through 2020 with around 5% order cancellations with our suppliers and no workers were made redundant.
- The second priority was to continue driving the business: we developed new product ranges and invested in marketing, and we are confident that this will strengthen the Dragomir brand.
- The third priority was to continue our efforts towards carrying out ethical, social and environmentally sustainable business: we continued our fight against any form of discrimination and launched our sustainability strategy to contribute to the UN Sustainability Goals.
The disastrous financial results of the second quarter were followed by stronger third and fourth quarters. Unfortunately, the third and fourth quarter results could not compensate for the disastrous second quarter. However, we are very optimistic about the future for the sports industry and for Dragomir GMbH.
Leo Lwenstein
Dragomir GMbH Chief Executive Officer
- a.Based on the two CEO's letters to the companies' shareholders, which perspective on the scope of corporate governance do you think each CEO ascribes to? Explain reasons with reference to the content of the letters.
- b.What type of board of directors do you expect Haihai Sports Inc. and Dragomir GMbH to have, and why?
- c.explain the function of a supervisory board and how it is different from a unitary board.
Fundamentals of Financial Accounting
ISBN: 978-0078025914
5th edition
Authors: Fred Phillips, Robert Libby, Patricia Libby