Corporate Governance in NORDEN
Table of content
- A two-tier management structure
- The Board of Directors
- Recommendations from the Danish Corporate Governance Committee/NASDAQ OMX Copenhagen A/S on best corporate practice
NORDEN continuously works on corporate governance issues and seeks to provide its shareholders and other stakeholders in due time with precise and relevant information about the Company’s strategy, operations, results and expectations.
The Board of Directors and the Board of Management closely follow the debate on corporate governance matters. The Board of Directors assesses that NORDEN complies with most of the corporate governance guidelines issued by the NASDAQ OMX Copenhagen A/S.
Download whitepaper on NORDEN’s corporate governance practice
Covering the financial year 2011:
pdf English. pdf Danish
Covering the financial year 2010:
pdf English. pdf Danish
Covering the financial year 2009:
pdf English. pdf Danish
1. A two-tier management structure
As a Danish company, NORDEN has a two-tier management structure consisting of a Board of Directors elected by the shareholders and the employees and a Board of Management appointed by the Board of Directors. There is no duality between the two bodies.
The Board of Directors appoints the Board of Management and sets out its terms and responsibilities. The Board of Management prepares and implements a strategy and is responsible for the day-to-day management, organisation and development of NORDEN, for managing assets and liabilities, accounting and reporting. The Board of Directors evaluates the Board of Management’s performance.
NORDEN’s vision, mission and values are the cornerstones of the Company’s management. The management focus is long term, and the goal is for the Company to continuously develop for the benefit of its stakeholders and to achieve stable, high earnings within the risk framework set out by the Board of Directors.
2. The Board of Directors
2.1. Role
The Board’s guiding principle is to add value for the benefit of shareholders, customers and employees through controlled growth of the dry cargo and tanker activities.
The Board of Directors determines strategies, policies, action plans, goals and budgets and sets out the risk management framework and supervises procedures etc. The Board of Directors appoints the Board of Management and sets out its terms and responsibilities.
According to the Articles of Association, the Board of Directors has the authority to distribute extraordinary dividends and a 1-year authority to authorise NORDEN’s acquisition of treasury shares. The Board of Directors is not authorised to increase the Company’s share capital, however.
2.2. The work of the Board of Directors
The Board of Directors sets out a work schedule to ensure that all relevant issues are discussed during the year and that important policies, rules of procedure, internal rules, etc. are discussed at least once a year. The strategy and budget process is initiated in October and the Board of Directors holds a strategy seminar in November, while the strategy and budgets are finally adopted at a meeting in December. As a result of the revised recommendations for corporate governance and the increasing general focus on corporate social responsibility, the Board of Directors has attached more importance to this work in 2010.
In 2010, the Board of Directors held 13 meetings. Attendance was 98% for the shareholderelected board members while the figure was 56% for the employee-elected board members. To this should be added, however, that the employee-elected members are seamen who might be at sea at the time of the meetings and therefore not able to participate.
The Board of Directors has appointed a remuneration committee which responsibility is to oversee the implementation of NORDEN’s remuneration policy. The committee held three meetings in 2010. More details about remuneration committee.
The task of the audit committee is to supervise control and risk management systems, audits, financial reporting, etc. The responsibilities of the audit committee are undertaken by the Board of Directors in unison, and 4 meetings included this work, with discussions of, among other things, counterparty risk, impairment test, management and reporting tools and IT systems. More details about audit committee
2.3. Board composition
Four to six members of the Board are elected by the shareholders by the shareholders in general meeting and the additional number of members are elected by the employees according to Danish legislation. All board members elected by the shareholders are independent of NORDEN. They hold no interests in the Company other than their interests as shareholders or representatives of shareholders.
The Board of Directors currently has 8 members – 5 elected by the shareholders and 3 elected by the employees in NORDEN. None of the members elected by the shareholders have previously been employed with the Company, nor do they have any interest in NORDEN other than their natural interests as shareholders.
The Board of Directors is composed so that it possesses the skills required to perform its managerial and strategic tasks and act as a good sparring partner to the Board of Management. Particularly relevant skills are: insight in the shipping industry in general and specifically within the areas of dry cargo and tankers, general management, strategic development, risk management, investment, finance and accounting. The current Board of Directors is considered to possess these skills.
2.4. Election
At each annual general meeting, two of the longest serving members elected by the general meeting retire. At the annual general meeting on 22 April 2010 Mogens Hugo and Alison J. F. Riegels retired by rotation and both were re-elected.
At the annual general meeting on 11 April 2011, it will be proposed that Karsten Knudsen and Erling Højsgaard be re-elected to the Board of Directors.
The age limit for board members is 72.
2.5. Continuity
The seniority of the board members is high, and the Board of Directors has managed NORDEN in periods of high growth as well as during economic downturns. This experience and insight is considered a great asset.
2.6. Order of business
The Board’s work is set out in an order of business, which is revised annually. In addition, the Company is governed by the principles that regulate the interaction between its management and its stakeholders, e.g. the Danish Companies Act; the Danish Financial Statements Act; the rules of NASDAQ OMX Copenhagen A/S and NORDEN's articles of association, policies and directives.
From 2006 to 2009, the Board of Directors has carried out annual, systematic self-assessments on the basis of a questionnaire in order to improve its own work and its interaction with the Board of Management. The Board of Directors has also set up a remuneration committee to set out a framework for the Company’s remuneration and bonus payments. In 2010, no structured evaluation was performed but the issues were debated on an ongoing basis. In 2011, the Board of Directors will evaluate its performance, the internal cooperation between the members of the Board of Directors and the interaction with the Board of Management with assistance from an external and independent person in order to go into more depth with the evaluation.
The Board of Directors has established an audit committee. The responsibilities of the audit committee are undertaken by the Board of Directors in unison. More details about audit committee
In 2010, the Board of Directors held 13 meetings
The Board of Directors has planned 11 ordinary meetings in 2011. A fixed annual calendar ensures that all relevant issues are taken up and discussed during the year.
3. Recommendations from the Danish Corporate Governance Committee/NASDAQ OMX Copenhagen A/S on best corporate practice
In April 2010, the Danish Corporate Governance Committee issued revised recommendations. NORDEN’s Board of Directors reviewed and discussed the revised recommendations at 2 meetings held in the autumn of 2010 and consequently altered the practice in some areas where NORDEN did not comply with the new recommendations.
A systematic examination (whitepaper) of NORDEN’s corporate governance practice as compared with NASDAQ OMX Copenhagen A/S is available in the top section above.
NORDEN complies with the vast majority of the recommendations, but has chosen a different and more suitable practice in the following areas:
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The board members’ directorships in Danish and foreign companies and foundations are disclosed, but the Board of Directors has chosen not to include a few directorships in personally owned companies that are considered insignificant.
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The recommendations set out a new definition of the independence of a board member. According to this new definition, 3 of NORDEN’s board members elected by the shareholders are no longer independent as they have close ties to a major shareholder and have been members of the Board of Directors for more than 12 years, respectively. NORDEN is of the opinion that it is a valuable asset to have a nucleus of members highly experienced in managing a growing and complex business in a special industry like shipping. To this should be added that there is an ongoing renewal of the Board of Directors: 2 of the board members elected by the shareholders and all board members elected by the employees are serving their first term of office.
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According to the recommendations, all board members elected by the shareholders should stand for re-election every year, but in NORDEN, the 2 board members elected by the shareholders with the longest term retire every year. This model ensures reasonable continuity.
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According to the recommendations, the Board of Directors should normally not perform the functions of the audit committee. NORDEN has decided that all members of the Board of Directors are members of the audit committee because matters such as financial conditions, risk, accounting policies and audit and accounting estimates are considered to be of such importance that they need to be discussed by the entire Board. To this should be added that the Board of Directors consists of relatively few members, and discussions about relevant matters may therefore easily be conducted by all members of the Board. Since the audit committee consists of the entire Board of Directors, it is only natural that the Chairman of the Board of Directors is also the Chairman of the audit committee, although this is not in compliance with the recommendations.
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According to the recommendations, companies should establish a nomination committee. NORDEN does not have a nomination committee. The Chairman of the Board is in charge of ongoing discussions being held to evaluate the structure, size, skills, knowledge and composition of the Board of Directors and decisions are made by the entire Board.
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According to the recommendations, performance criteria should be established for the variable component of the remuneration to the Board of Management. NORDEN has fixed criteria for the CEO but not for the CFO for whom bonuses are awarded at the discretion of the remuneration committee.
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Severance payments to the Board of Management may in case of ”change of control” (e.g. takeover or merger) constitute 3 years’ salary in total while the recommendation is 2 years.
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NORDEN does not disclose the remuneration of each member of the Board of Management and the Board of Directors as recommended, but instead the total amount of remuneration. NORDEN believes that what is important is that the shareholders are able to consider the total amount and development of remuneration.
3.1. Initiatives in 2011
The Board of Directors has planned 11 ordinary meetings in 2011. The Board of Directors’ opinion is to maintain its remuneration for 2011. During 2011, the Board of Directors will, however, discuss its remuneration in light of workload, requirements, market conditions, etc. and present the result of these discussions to the shareholders at the annual general meeting in 2012.
A systematic examination (whitepaper) of NORDEN’s corporate governance practice as compared with the Danish Corporate Governance Committee/NASDAQ OMX Copenhagen A/S is available in the top section above.