Remuneration
Table of content
- Remuneration policy
- Remuneration in 2010
- Initiatives in 2011
- Board remuneration
- Board options
- Remuneration committee - terms of reference
1. Remuneration policy
Remuneration is determined according to the remuneration policy (see below "General Guidelines for incentive based remuneration") applying to the Board of Directors, the Board of Management and the employees adopted at the annual general meeting in April 2011. The policy is implemented by a remuneration committee answering to the Board of Directors. The policy is to ensure that NORDEN’s remuneration enables the Company to recruit and retain competent managers and employees, which is crucial in order for the Company to obtain the maximum return on its investments. Therefore, NORDEN offers a competitive base salary and pension scheme as well as bonuses, employee shares and share options. These share-based incentive programmes are particularly designed to promote the long-term conduct of the employees and strengthen the community of interest between shareholders and employees.
pdf General Guidelines for incentive based remuneration
pdf Retningslinier for incitamentsaflønning 
2. Remuneration in 2010
On land, fixed salaries were raised by approximately 4% in Denmark and slightly more in the overseas offices. This should be seen in light of the general pay freeze on land in 2009 and the sharper competition for competent employees internationally. The total payroll costs rose further, however, due to the recruitment of a number of new employees. At sea, wages and salaries rose by approximately 1% for Danish officers and slightly more for non-Danish seamen.
In 2010, NORDEN allotted a number of managers and employees individual bonuses amounting to a total of USD 6.9 million, against USD 3.4 million the previous year. The allotted bonuses equalled 2.8% of the net profit (1.5% in 2009). The total bonus allotment included stay-on bonuses of USD 0.6 million (USD 0.4 million in 2009) for selected managers, including the members of the Board of Management. This amount is payable on the condition that the managers remain with the Company for the period 2011-13, and for the CEO, the amount is also conditional on NORDEN earning a certain profit in the coming years.
Managers’ bonuses are determined by the Board of Directors upon the recommendation of the Board of Management. Bonuses for other employees are awarded by the Board of Management in collaboration with the heads of department.
In 2010, the Board of Directors also found that it was justified to award the employees an extraordinary collective bonus to appreciate their commitment and contribution to NORDEN’s solid financial performance under difficult market conditions. Each full-time onshore employee with 1 year of seniority received DKK 25,000, while employees with lower seniority received a pro rata share of this amount. Employed officers also received a collective bonus.
In March 2010, the Board of Directors granted share options to selected employees. 59 people received a total of 350,000 share options on the same terms as the previous year. The theoretical value of the options was USD 3.3 million according to the Black-Scholes model. Senior Management is required to reinvest 25% of any net gain on their options in NORDEN shares and keep these shares for 2 years.
Finally, in 2010 NORDEN granted 31,675 shares as employee shares with a value of USD 1.3 million.
3. Initiatives in 2011
In January 2011, NORDEN again granted employee shares, which are tax-exempt for employees in Denmark. All employees with at least one year’s seniority received 122 shares each, totalling 36,356 shares with a market value of USD 1.5 million. The shares were taken from the Company’s portfolio of treasury shares.
In March 2011, the Board of Directors granted 350,000 share options to a number of managers and employees. In determining the strike price, a 20% margin is added compared to the market price at the date of grant (against previously 8% p.a. up to the exercise date) to ensure that the employees will only profit once the shareholders have received a return of 20%. Otherwise, the terms are unchanged from previous years. The theoretical market value of the options has been calculated at USD 3.4 million according to the Black-Scholes model, provided that all options are granted and exercised at the earliest opportunity. The calculation presupposes a 3.25-year volatility of 58.8%, an annual dividend of DKK 5 per share, a risk-free interest rate of 2.06% and a USD/DKK exchange rate of 549.26.
Bonus allotments for 2011 will be determined towards the end of the year.
4. Board remuneration
The ordinary emoluments of the members of the Board of Directors are determined by the shareholders at the general meeting. For 2010, the annual general meeting decided (11 April 2011) that the Board’s remuneration is USD 1 million.
The Board of Directors’ opinion is to maintain its remuneration for 2011. During the year, 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.
5. Board options
The Board of Directors does not possess share options or warrants.
6. Remuneration committee - terms of reference
The Board of Directors has appointed a remuneration committee. The committee's responsibility is to oversee the implementation of NORDEN’s remuneration policy. The members of the committee are – Mogens Hugo, Karsten Knudsen and Arvid Grundekjøn.
The remuneration policy reflects the fact that incentive-based remuneration is customary among the shipping companies, which compete across borders for the best employees. Therefore, NORDEN must be able to offer a base salary conforming to market standards as well as incentives to high-performing individuals. The most important incentives are bonuses, share options and employee shares. NORDEN does not wish to lead in terms of salaries, but the recruitment and retention of qualified employees is essential in order to ensure maximum return on the Company’s large investments. Therefore, remuneration has to be a competitive element in NORDEN’s overall employee package, which also includes good career, secondment and supplementary training opportunities, short chains of command, extensive delegation and responsibility, a strong corporate culture, value-based management, etc.