The board and management of Hafslund ASA comply with the requirements of the Norwegian Code on Corporate Governance of 21 October 2010, amended in 2011, which can be viewed at www.nues.no Hafslund issues a report on corporate management in accordance with § 3-3b of the Norwegian Accounting Act and the above Code.
Deviations from the Code are commented in brief below, and in more detail in each individual point in the report.
- Hafslund has two classes of shares. Class A shares grant ordinary voting rights of one vote per share. Class B shares do not grant ordinary voting rights. (Deviates from point 4 of the Code.)
- The Norwegian Code of Practice for Corporate Governance concerning general meetings is primarily satisfied through Hafslund ASA’s Articles of Association and established company practice; however, the company deviates on one point in that one of the instructions of the Code is that the board shall ensure that “there are routines to ensure independent chairing of the general meeting”. Until further notice the board will adhere to Hafslund’s Articles of Association, which state that “the general meeting is chaired by the board chair or a party elected by general meeting”. (Deviates from point 6 of the Code.)
- Based on an agreement between Hafslund ASA and employee unions the Group does not have a corporate assembly. (Deviates from point 8 of the Code.)
The following is a summary of the company’s corporate governance policies. The report follows the same structure as the Code of 21 October 2010. Disclosures that Hafslund is obliged to give in the 2011 annual report in accordance with § 3-3b of the Norwegian Accounting Act regarding reporting on corporate management are incorporated into this report.
1. Report on corporate governance
Hafslund ASA’s principles for corporate governance shall contribute to long-term value creation and secure the confidence of the owners and other stakeholders in the Board of Directors and management.
The board of Hafslund ASA monitors the requirements of the Norwegian Code of Practice for Corporate Governance of 21 October 2010. An overall summary of the company’s corporate governance policies is contained in the company’s annual report, covering each individual point in the Code. Any deviations from the Code are explained.
In accordance with Hafslund’s core values employees shall act with integrity, courage and spirit in interacting with employees, customers, suppliers and partners:
- Integrity means striving to maintain high ethical standards, being reliable, acting with self-confidence and respect for others, being inclusive, respecting differences, and welcoming the success of co-workers and helping each other advance.
- Courage means being open and direct, taking initiative, daring to challenge the status quo, delegating, backing one’s own opinions and daring to take risks and making allowances for the occurrence of mistakes; however, on the understanding that these should not be repeated.
- Courage means being engaged in and showing pride and pleasure in our work and exhibiting good spirit and humour.
Hafslund is committed to maintaining the highest ethical standards in all its business operations. We communicate this message within the Group by promoting one of our core values: integrity. All employees in the Group have signed Hafslund’s code of conduct.
Hafslund’s employee code of conduct applies to all those directly employed by the Group, as well as union representatives and members of the board. The terms of the code of conduct, which are rooted in our corporate values, regulate matters such as personal conduct, conflicts of interest, bribery, corruption and competition, and provide for sanctions in cases where the code has been breached. The code of conduct should be viewed as establishing a minimum standard, since all employees are required to comply with external laws and regulations, sector-specific ethical rules and internal rules applicable to Hafslund’s business operations. Detailed guidelines have been drawn up for all employees whose work involves contract negotiations, since this area is particularly vulnerable to influence.
The Group has drawn up clear guidelines governing corporate social responsibility, including guiding overarching goal and strategies. This is further concretised through the environmental policy and procedures for environmental management, along with ethical guidelines for suppliers and associated procedures for ethical trading. Ethical guidelines have also been prepared for investments. The companies work in accordance with an established template, and report statuses and challenges at least twice a year. The Group’s corporate social responsibility initiatives should be viewed as part of the Group’s internal control system.
Hafslund’s business is profiled in the Articles of Association. In accordance with § 3 of the Articles of Association the company’s object involves:
- Production, processing, distribution, sale and utilisation of energy
- Industry, trade, consultancy, contracting and finance-related business
- Other activities relating to the above objects, including operation and management of the company’s properties and other resources.
The object may be promoted through participation in or collaboration with other companies in Norway or abroad.
The Group’s business concept is: “delivering energy solutions and infrastructure for the future – simply and efficiently”.
Hafslund’s objectives and strategies shall accord with the company’s Articles of Association, and be communicated via the company’s shareholder reports, investor presentations and/or stock market notifications.
3. Equity and dividends
The equity ratio shall at all times be adequate in relation to the company’s objectives, strategy and risk profile. The equity ratio shall not exceed the value required to safeguard reasonable development of the company’s values.
Hafslund aims to provide its shareholders with competitive returns compared with alternative investments of a similar risk profile. The company endeavours to achieve such returns through a combination of growth and dividends. The Group’s long-term dividends policy is based on the payment of the equivalent of at least 50 percent of annual profits (after tax) in normal years, adjusted for non-cash generating items.
Board mandates to implement capital increases shall be limited to defined objects. If a board mandate relates to several objects, each object should be reviewed as an individual item in the general meeting. In accordance with the Norwegian Public Limited Liability Companies Act, board mandates may be issued for a period of up to two years. Pursuant to the Norwegian Code of Practice on Corporate Governance this permission should not be used and board mandates shall not be issued for a period stretching beyond the date of next Annual General Meeting. Similar rules apply to board mandates concerning the purchase of treasury shares. An overview of any such board mandates is available in the general meeting minutes from the company’s most recent general meeting, which can be viewed on the company’s website www.hafslund.no
4. Equal treatment of shareholders and related-party transactions
Hafslund strives to treat all the Group’s shareholders equally.
Hafslund has two classes of shares. Class A shares grant ordinary voting rights of one vote per share. Class B shares do not grant ordinary voting rights. This deviates from the Norwegian Code of Practice on Corporate Governance, and requirements for completely equal treatment of shareholders. The board continually assesses any basis for merging the two share classes with the company’s majority shareholders, and will submit a proposal to the general meeting when there are indications that such a motion would be adopted. A merger of the company’s two share classes accords with sound corporate governance and would be deemed to promote the shares’ liquidity.
If in the event of any capital increase in which the existing shareholders’ preference rights are deviated from, such shall be justified based on the company’s and the shareholders’ joint interests in the agenda prepared for the general meeting. If the board adopts a capital increase involving deviation from preference rights based on a mandate, justification for such shall be published in the stock market notification in connection with the capital increase.
The company’s transactions in treasury shares should be effected via the stock exchange or in any other way at the listed price.
In the case of non-immaterial transactions between Hafslund ASA and shareholders, board members, executive employees or their related parties, the board should obtain an independent valuation from a third party. This does not apply when the general meeting is due to review the item in question in accordance with the regulations of the Norwegian Public Limited Liability Companies Act. An independent valuation should also be obtained for any transactions between companies in the same group where minority shareholders are involved.
Board members and executive employees, or their related parties, should notify the board if they, directly or indirectly, have a material interest in any agreement entered into by the company.
5. Free tradability
Within the limitations determined by legislation, Hafslund’s shares may be freely transferred and acquired.
6. General meetings
The board of Hafslund ASA should enable as many shareholders as possible to exercise their rights by participating in the company’s general meeting, and ensure that the general meeting is an effective meeting place for shareholders and the board in accordance with the Norwegian Code of Practice on Corporate Governance.
The requirements of the Norwegian Code of Practice on Corporate Governance regarding this point are primarily satisfied through Hafslund ASA’s Articles of Association and established company practice. However, the company deviates in one point in that the Code’s instructions are that the board should ensure that: “there are routines to ensure independent chairing of the general meeting”. Until further notice the board has chosen to deviate from the recommendation on this point and continue the practice adopted to date in accordance with Hafslund’s relevant Article of Association, which states that “the general meeting is chaired by the board chair or a party elected by the general meeting”.
At the 2011 Annual General Meeting the board proposed the appointment of an independent board chair. A suitable party was elected by the general meeting to chair the meeting. Accordingly the recommendation of the Code was complied with in practice.
7. Nomination Committee
Hafslund ASA has a Nomination Committee elected by the general meeting. The general meeting shall elect the Committee’s chair and members, and establish their remuneration taking into account the nature and time requirements of their relevant remits.
The Nomination Committee’s tasks are discussed in the guidelines for the Nomination Committee. The Nomination Committee’s guidelines are adopted by the general meeting. The Committee’s remit is to propose candidates for election to the board, and to recommend fees for members of these bodies. The Nomination Committee’s view should be justified and contain relevant information on the candidates and their independence.
Requirements relating to the election of the Nomination Committee are laid down in Hafslund ASA’s Articles of Association (§ 8). Efforts shall be made to ensure that composition of the Nomination Committee reflects the breadth of shareholder interests and level of expertise required, and that the majority of members are independent of the board and general management. A maximum of one member of the Nomination Committee should be a board member, who should therefore not stand for re-election to the board. Similarly, general management or other executive employees should not be members of the Committee. Hafslund ASA has no corporate assembly or representative body.
A list of members of the Nomination Committee and deadlines for submitting proposals to the Committee, and the Nomination Committee’s instructions can be viewed on Hafslund’s website www.haflsund.no
8. Corporate assembly and board of directors, composition and independence
Based on an agreement between Hafslund ASA and employee unions, cf. § 6-35, second para, of the Norwegian Public Limited Liability Companies Act, Hafslund ASA does not have a corporate assembly. This deviates from the Norwegian Code of Practice for Corporate Governance.
The board of Hafslund ASA shall comprise between five and twelve members. Between three and eight members are elected by the general meeting. The period of office for members elected by the general meeting is two years. The period of office for as close as possible to half of these members shall expire each year. At least two board members, or at least the number of board members, including any observers and deputy members that the employees may demand in accordance with the Norwegian Public Limited Liability Companies Act and associated regulations, shall be elected from employees when the company does not have a corporate assembly. The period of office is two years.
The board members’ CVs can be viewed on Hafslund’s website www.hafslund.no and in the company’s annual report.
The Nomination Committee instructs the board’s shareholder-elected members with regard to the general meeting. The company is keen to ensure that potential board candidates possess the necessary industry understanding, plus adequate commercial, management and financial expertise required to be able to function as a forward-looking, strategic and performance-enhancing sounding board for administration. Until further notice the board shall be composed so as to satisfy the shareholder’s interests and function as a collaborative body.
Neither shareholder-elected board members nor their related parties shall perform advisory or consultancy assignments for the company, be employed by Hafslund or have agreements of material economic importance with the Group. The Group shall as a general rule also not purchase advisory and consultancy services from a company which a board member owns or is employed by. Any exceptions to these principles shall be reviewed on a case-by-case basis by the board. Board members shall also not be related parties of other board members or executive employees.
The instructions for the activities of the board state that board members may not participate in the discussion or clarification of issues of particular relevance to themselves, or involving related parties that the member may deem to have a prominent personal or financial interest in the case. The same applies to the President and CEO.
Board members may also not participate in the review of items where the relevant parties hold a key position in a company with a relevant or close conflict of interest with Hafslund ASA regarding the item.
In addition, at least two of the company’s shareholder-elected board members must be independent of the company’s main shareholders in order to promote shareholder confidence. The majority of the shareholder-elected board members should be independent of the company’s general management and/or key business connections. Representatives of general management may not serve on the board.
In light of the fact that the company does not have a corporate assembly, the board chair should be elected by the board.
Hafslund ASA’s board members are encouraged to own shares in the company. The board should provide information on board meeting attendance in the annual report. Disclosure of which board members are to regarded as independent should also be made.
Board member attendance at meetings in 2011:
|Name||Number of meetings attended||Number of meetings not attended||Representative of:|
|Maria Moræus Hanssen||9||1||Independent|
|Hans Kristian Rød||9||1||Fortum|
|Odd Håkon Hoelsæter||7||Independent|
|Tyra Marie Hetland||10||Employees|
Board members have had differing periods of office, and have not had cause to attend the same number of meetings.
9. The work of the Board of Directors
The board is responsible for the management of Hafslund and establishing a strategic direction, ensuring proper organisation of the business and supervising general management. § 9 of the Articles of Association regulates the election and service period of board members.
In accordance with the Norwegian Public Limited Liability Companies Act Hafslund is obliged to adopt guidelines regulating the board’s activities where one of the objectives is the establishment of guidelines that apply to the board’s work and case handling, including the most important rules governing the President and CEO’s assignments and obligations to the board, and the board’s authority and competence in agreement with applicable legislation.
Pursuant to the Norwegian Public Limited Liability Companies Act, the board has overarching responsibility for management of the company and for supervising general management and the company’s activities.
In accordance with the instructions to the board, the President and CEO shall submit a proposed annual plan with a particular focus on targets, strategy and implementation once a year in collaboration with the board chair. A total of eight, and a minimum of four, meetings should normally be held each year. The President and CEO, in consultation with the board chair, is responsible for preparing and documenting items to be considered by the board.
The board shall elect a vice chair to act as the board chair’s deputy, and otherwise act as an effective sounding board for the latter. The board chair should endeavour to ensure that the board’s negotiations take place and that key decisions are taken by the entire board. In cases where the board chair is or has been actively involved (e.g. negotiations on mergers or acquisitions), another board member should be elected to chair the discussion.
Pursuant to the Norwegian Public Limited Liability Companies Act the company shall have an Audit Committee. The Audit Committee is elected by and from the board’s members.
The board has established a Compensation Committee which shall help to ensure a thorough and independent review of cases relating to the remuneration paid to executive employees.
The board discloses use of the Compensation Committee in the annual report.
The board evaluates its own performance once a year. The Nomination Committee is informed of such work, and of the conclusions of the evaluation.
10. Risk management and internal control
The board shall ensure that the company has sound internal controls and appropriate systems for managing risk attaching to the Group’s business. Risk management and internal controls shall reflect the scope and nature of the business and values and guidelines for ethics and corporate social responsibility.
The board carries out an annual review of the Group’s key risk areas and internal controls. The board shall further describe the main elements of the company’s internal control and risk management systems relating to financial reporting in the Group’s annual report.
The Group’s annual report shall provide a description of the main elements of the company’s internal controls and risk management systems connected to its financial reporting and operations.
The board’s reporting of the main elements of the Group’s systems for internal control and risk management regarding financial reporting
The Hafslund Group reports in accordance with the requirements of international accounting standards (IFRSs). The Group has established guidelines designed to secure reliable, relevant, timely and identical information for shareholders and the finance markets in general. The guidelines also cover internal requirements.
The Group uses the accounting system IFS and the consolidation tool Cognos Controller. The latter includes an overarching account plan and contains controls to check the consistency of information. The reporting units are responsible for implementing adequate control checks to prevent errors in financial reporting. Group finance prepares financial reports for the Hafslund Group and ensures that reporting takes place in agreement with applicable legislation, accounting standards, established accounting policies and the board’s guidelines. The Head of Accounting prepares guidelines that clarify the requirements to be complied with by the reporting units. Processes and control measures have been established to quality-assure financial reporting.
In 2011 Hafslund decided to increase the level of company management in the Group, including the adoption of a common framework and methodology to support all operational units and auxiliary functions. The Group has prepared an intranet-based template to collate and communicate guiding documents, including instructions and guidelines on day-to-day accounting, interim and annual financial reporting. The managers of the Group’s accounting units are responsible for implementing appropriate and effective internal controls in agreement with established instructions and guidelines.
The board reviews the annual risk profile for each business area and on a group-wide basis, including by identifying and assessing annual risks of material errors in the Group’s financial reporting. Company management in the subsidiaries is responsible for implementing necessary controls to mitigate identified risks. Group management evaluates the implementation of suitable reporting tools for monitoring the subsidiaries’ mitigation of identified risks.
Group management assesses the business areas’ performance and profitability on an ongoing basis, together with issues and events that impact future performance and optimal resource utilisation. Financial performance is regularly reviewed with the individual business areas and in Group manager meetings.
The Audit Committee reviews financial reporting for the Hafslund Group quarterly. The Committee carries out a thorough review of material subjective items and individual transactions along with any changes in accounting practice. The Committee holds talks with management and the external auditors as part of its quarterly review. The board of Hafslund ASA reviews consolidated interim and annual financial statements after they have been appraised by administration and the Audit Committee. The annual financial statements are adopted by the Annual General Meeting.
11. Board members’ fees
The board’s remuneration must be reasonable in relation to the tasks and responsibilities incumbent on the board members. The 2003 Annual General Meeting resolved that remuneration of the board’s members would be established by the general meeting for the preceding year. The board’s fees are not performance-related. The board is not allocated options.
The main rule is that board members, or companies to which they are related, shall not take on particular tasks for the company in addition to board-related activities. If they nonetheless do so, the board shall be informed of such, and fees for such tasks should be approved by the board.
All remuneration paid to individual members of the board, including any fees for specific assignments, and the number of shares owned by the various board members, are disclosed in Hafslund’s annual report.
12. Remuneration paid to executive employees
Guidelines for establishing remuneration paid to the CEO and executive employees are adopted by the board and presented to the general meeting in accordance with prevailing legislation.
The guidelines for determining the remuneration payable to executive employees should state the main principles of the company’s executive pay policy and seek to achieve identical interests between shareholders and executive management.
Performance-related remuneration for executives in the form of option and bonus programmes or similar should be linked to value creation for the shareholders or profit development for the company over time, and be based on measurable conditions which the employee can influence. A ceiling should be set for profit-related remuneration.
13. Information and communication
The overall goals of Hafslund ASA’s guidelines on information and communication are transparency and equal treatment of all shareholders.
A financial calendar is published each year in accordance with the rules for listing on Oslo Stock Exchange.
Information for the company’s shareholders is published on the company’s website at the same time it is sent to the shareholders. Hafslund ASA is subject to the stock market’s rules regarding publication of information.
The board encourages the company to maintain contact with shareholders outside the general meeting, provided such does not involve a breach of the principle of equal treatment of shareholders. Referrals of material importance shall be dealt with by the board chair.
14. Company takeovers
The main principle regarding takeover offers is that Hafslund shall act honestly and ethically. In potential takeover situations the board shall pay particular attention to its duty of care to ensure that all the shareholders’ values and interests are upheld. Accordingly the business’s operations shall not be unnecessarily impaired, and shareholders shall have enough time and information to make an informed judgment on any offer.
Except on particular grounds, the board will not seek to prevent or place obstacles in the way of any party who wishes to make an offer for the company’s business or shares.
If an offer is made for the company’s shares the company’s board will not exercise any authorisation they may have to issue new shares or implement any other measures for the purpose of preventing the offer being completed, unless such action has been approved by a general meeting of shareholders.
If an offer is made for the company’s shares, the board should issue a declaration with a recommendation as to whether the shareholders should accept the offer or not. The board’s declaration on the offer should state whether the board is unanimous in its recommendation. If such is not the case, the grounds on which individual board members have reservations should be stated in board’s declaration, and the board should obtain a valuation from an independent expert. The valuation should be justified and published no later than the time of the board’s declaration.
Transactions which in reality involve a disposal of the company’s business should be presented to the general meeting for resolution.
The auditor has presented a broad outline of a plan for implementation of audit work to the Audit Committee.
The auditor should participate in board meetings to review the annual financial statements. In the meetings the auditor should review any material changes in the company’s accounting policies, evaluation of material accounting estimates and all material matters where there has been disagreement between the auditor and administration.
The auditor has participated in a meeting with the Audit Committee on the company’s internal controls, including identified weaknesses and proposed improvements.
The board and auditor had one meeting without the Managing Director or other members of general management being present.
The board has established guidelines governing general management’s employment of the auditor for services other than auditing.
At the Annual General Meeting the board will disclose the auditor’s remuneration split between auditing and other services.