Rules of procedure for The Board of Directors of Orkla ASA
These Rules of Procedure were approved at a Board meeting on 3 November 2004. Revised on 19 September 2006, 3 May 2007, 13 June 2012, 11 March 2014 and 10 February 2016.
1. THE BOARD’S RESPONSIBILITIES AND DUTIES
1.1 General duties
1.1.1 The administration of the company is the Board’s responsibility. The administration will be conducted in a manner that can be justified towards shareholders, employees, creditors, and other third parties. The Board will ensure that the business is organised in a satisfactory manner, including ensuring that the business is run in accordance with the law.
1.1.2 The Board will draw up plans and budgets for the company’s operations.
1.1.3 The Board will keep itself up-to-date on the company’s financial status, and is obliged to ensure that its operations, accounts, and asset management are subject to satisfactory controls.
1.1.4 The Board conduct any investigations it deems necessary to be able to carry out its tasks. The Board will conduct such investigations if one or more Board members require it.
1.1.5 The Board will supervise the day-to-day management of the company and all other aspects of its operations.
2. THE GENERAL MANAGER’S DUTY TO INFORM THE BOARD ABOUT IMPORTANT MATTERS, ETC.
2.1 Periodic reports to the Board
2.1.1 The general manager will brief the Board at least once a month – in a meeting or in writing – on the company’s operations, status and profit performance. The Board may at any time require that the general manager give the Board a detailed report on specific matters.
2.1.2 The general manager will inform the Board when the basis for a prior decision which is of significance to the company’s operation has materially changed.
2.2 Follow- up of decisions
2.2.1 The general manager will ensure that the Board’s decisions are implemented. The general manager will also ensure that the company’s employees and other parties involved are adequately informed about the Board’s decisions.
2.2.2 The general manager will ensure that the guidelines for the preparation of Board matters are observed.
3. THE BOARD’S PROCEEDINGS
3.1 Notice of Board meetings
3.1.1 The general manager, in consultation with the Board Chair, will Board meetings. Board members and the general manager may demand that the Board be convened.
3.1.2 Board meetings will be called in an appropriate manner, with the necessary notice. The notice of the meeting will indicate the agenda for the meeting.
3.2 Holding of Board meetings
3.2.1 The Board will consider matters at meetings, unless the Board Chair finds that the matter may be submitted in writing or be dealt with in some other satisfactory manner. Annual financial statements and reports will be considered at meetings.
3.2.2 The Board may make decisions when more than half of the members are present or taking part in the Board’s consideration of a matter. However, the Board may not make decisions without all the Board members as far as possible having been given the opportunity to take part in consideration of the matter.
3.2.3 A decision taken by the Board requires that a majority of the Board members taking part in consideration of a matter have voted in favour of it. In the event of a tie in the voting, the vote given by the chairman will be decisive.
3.3 Board matters
3.3.1 The Board will deal with matters that require Board consideration by law, are of great significance or of an unusual nature relative to the company’s situation.
3.3.2 The Board Chair will ensure that relevant matters are considered. Board members and the general manager may demand that the Board consider specific matters.
3.3.3 In an individual case the Board may authorise the general manager to make decisions in matters within the remit of the Board.
3.4 Board committees
3.4.1 The Board of Directors will establish special Board committees to the extent that the Board finds this expedient for its proceedings. The responsibility of the Board committees is to prepare matters for consideration, and does not change the duties of the Group Executive Board or the individual Board members.
The Board of Directors has established the following committees:
3.4.2 The Compensation Committee
The main responsibilities of the Compensation Committee are to:
(i) support the Board in connection with the appointment of the President and CEO,
(i) prepare for consideration matters relating to the salary and terms of employment of the President and CEO to enable the entire Board, once a year, to participate in the evaluation of the President and CEO and in decisions concerning the CEO’s terms of employment
(ii) to review and make recommendations regarding the strategy, profile, principles and framework for the remuneration of Orkla’s senior executives, including preparing for consideration matters of principle relating to levels of pay, bonus and incentive systems, pension terms and conditions, employment contracts and the like for senior executives
(iii) make recommendations regarding leadership development, management assessments and succession planning
(iv) consider special issues related to the remuneration of Group employees insofar as the Committee finds that they concern matters of particular importance to the Group’s competitive position, image, and ability to recruit and retain key employees, etc.
The Compensation Committee will prepare the following for consideration by the Board of Directors:
(i) in connection with the contract and terms of employment of the President and CEO:
- a proposal for a process for appointing a new President and CEO
- an assessment of a new employment contract or adaptation of the present contract of the President and CEO
- a draft of an annual performance contract for the President and CEO, containing requirements relating to goals in accordance with the Board’s ambitions for the business and further development of the President and CEO’s leadership behaviour and qualifications
- an annual assessment of the President and CEO’s performance, comparing it with the established performance contract
- an annual assessment of the overall remuneration of the President and CEO and, if applicable, submit a proposal for changes to the Board,
- an assessment of and, if applicable, a proposal for a severance package for the President and CEO
(ii) an assessment of management development and succession planning based on prior Board discussions
(iii) an assessment of new and/or amended remuneration strategies and principles that are to be submitted to the Board for decision
(iv) an assessment of other important personnel matters related to senior executives and other employees, including principles of an unusual nature or matters that may present a particular risk to the company’s reputation
(v) a draft of the Board’s Statement of guidelines for the pay and other remuneration of the executive management.
The views of the Compensation Committee will also be heard before a decision is made by the President and CEO in connection with:
(i) new employment contracts or amendments to existing standard contracts for employees who report directly to the President and CEO,
(ii) annual salary assessments and payment of variable pay to persons who report to the President and CEO,
(iii) consideration of a severance package, if applicable, for employees who report to the President and CEO.
The Compensation Committee will consist of three members. Orkla’s Director of Human Resources will be the Committee secretary. The Committee will meet at least once every six months. The Committee will prepare for consideration by the Board the terms of employment of the President and CEO in the first half of each year, and other issues relating to terms of employment and special conditions in the second half of each year.
The Group administration will assist the Committee with information, expert assessments and proposals where it is natural to do so. The Compensation Committee may engage external expertise as necessary.
The Compensation Committee will conduct an annual assessment of its own work and of these instructions.
3.4.3 Audit Committee
The Audit Committee will act as a preparatory body in respect of the Board’s administrative and supervisory tasks of oversight, financial control, and reporting, and in the follow-up of internal and external audits.
Among its responsibilities, the Audit Committee will:
(i) Make sure that internal and external financial reporting is properly organised, conducted efficiently, and of a high professional standard.
(ii) Monitor the effectiveness and relevance of the internal auditor’s work, and of the company’s risk management systems.
(iii) Follow up and assess the quality of the statutory auditing of the group companies and consolidated financial statements.
(iv) Help preserve the independence of the external auditors and see that current rules and policies regarding any additional services performed by the auditors for the group or group companies are observed.
(v) Where necessary, initiate enquiries and propose measures in relation to (i)-(iv).
(vi) Annually review, and where necessary update, its mandate, and submit its mandate recommendations to the Board.
The Audit Committee will not take decisions on behalf of the Board but will present its assessments and recommendations to the Board. The Audit Committee will report regularly to the Board, and not less than twice a year.
The Audit Committee will consist of at least three Board members. At least one member will have experience of accounting practice, financial management or auditing. The company’s internal audit staff will provide any necessary assistance to the Audit Committee, and the internal auditor will act as secretary to the Committee.
The Committee itself will decide which company representatives will attend the Committee’s meetings, and as necessary and not less than once a year, will request the participation of the external auditor.
On their own initiative, external and internal auditors will report to the Committee on matters they consider should be brought to the Committee’s attention; see also current instructions to the internal auditor.
3.5.1 Board members have a duty to loyally and prudently safeguard the Group’s interests and in this connection have a duty of confidentiality with regard to information and other matters that are not in the public domain and which have come to their knowledge as a result of their duties as members of the Board, including information regarding the Group and its operations or regarding business matters relating to other parties/business relationships. Before being given information, etc. which is not in the public domain, Board members will sign a declaration of confidentiality on a standard form. The duty of confidentiality applies during the Board member’s term of office and after the member’s term of office has terminated.
Board members’ duty of confidentiality does not apply if, in special cases, they have the right or obligation – in accordance with the Basic Agreement (Norwegian: "Hovedavtalen"), laws or regulations – to provide information to or consult with outside parties. Any Board member who communicates such information has a duty to inform the Board Chair about this on an ongoing basis, or in the case of the Board Chair, to inform the Deputy Chair of the Board. Any Board member who communicates such information is responsible for ensuring that the person who receives the information signs a declaration of confidentiality on a standard form (which may be obtained from the secretariat of Orkla’s Board of Directors).
3.5.2 The Board’s discussions and assessments, and the views, statements and dissenting votes of individual Board members are subject to the duty of confidentiality, unless otherwise agreed by the Board by a majority decision.
If the Board has decided that statements may be made to the media or to other outside parties regarding matters that have been or are to be considered by the Board, such statements, unless otherwise provided by the decision, will be issued by the Board Chair or by another person designated by the Board Chair. Board members may only make statements regarding such matters if this follows from the Board decision or has been decided by the Board Chair.
Board members will ensure that Board documents do not fall into the hands of outside parties, and in this connection will ensure that the documents are stored and handled in a safe and adequate manner. At the end of a Board member’s term of office, the Board member will return to the secretariat of Orkla’s Board of Directors all Board documents and any other material (including any duplicates or copies) which he/she has received in his/her capacity as a Board member and which are still in his/her possession.
Any breach of this duty of confidentiality may entail liability for damages and/or criminal liability.
3.6.1 A Board member must not take part in the consideration of or decision on issues of such special importance to himself or herself or to anyone close to him or her that the member must be considered to have an obvious personal or financial special interest in the matter.
3.6.2 Nor must a Board member or general manager take part in any matter concerning a loan or other form of credit for himself or herself or concerning the provision of security for his or her own debts.
3.6.3 It is incumbent on each Board member to consider on an ongoing basis whether there are matters which objectively speaking might weaken the general confidence in that Board member’s competency, or which could open up for conflicts of interest in relation to the Board’s consideration of the matter. Such matters as mentioned will be discussed with the Board Chair without undue delay. Where a Board member’s terms of employment or other tasks entail that conflicts of interest may arise on a regular basis, and in other special cases, concrete guidelines for the Board’s proceeedings will also be drawn up so as to prevent, as far as possible, such conflicts of interest from arising.
3.7 Joint and parallel investments
To avoid any harm to the company’s reputation, it is important to exercise transparency and caution in connection with investments involving factors that may be interpreted as entailing unfortunately close involvement/an unfortunately close relationship between the company and a member of the Board of Directors.
The management will inform the Board Chair before any transactions are carried out where the company is aware, or it is highly probable, that a member of the Board and/or anyone close to him or her is a party/interested party, even though the transaction is within the powers granted to the management. The Board Chair will determine how the matter will be dealt with. If the matter concerns the Board Chair, the management will inform the Deputy Chair of the Board who, together with another member of the Board, will determine how the matter will be dealt with.
Similarly, each member of the Board will inform the Board Chair if he or she is aware, or if it is highly probable, that Orkla is a party/interested party to a transaction/investment in which the member of the Board and/or anyone close to him or her wishes to invest. The Board Chair will determine how the matter will be dealt with. If the matter concerns the Board Chair and/or anyone close to him or her, he or she will notify the Deputy Chair of the Board who, together with another member of the Board, will determine how the matter will be dealt with.
However, these rules do not apply to trading in listed shares unless, following an overall assessment, special circumstances may indicate otherwise pursuant to the purpose of this provision (such as, for example, the size of the shareholding, limited liquidity in the share, representatives on the Board, expressed interest in the share).
3.8 Minutes of the Board of Directors
3.8.1 Minutes will be kept of the Board of Directors’ proceedings. They will as a minimum state the time and place, the participants, the mode of procedure and the Board of Directors’ resolutions. The minutes should also state the basis upon which the Board of Directors has made its resolutions.
3.8.2 If the Board of Directors’ resolution is not unanimous, the names of those having voted for and against will be stated. Board members and general managers who do not agree on a resolution may require their opinion to be entered into the minutes.
3.8.3 The minutes will be signed by all the members of the Board of Directors who have participated in the proceedings.
3.8.4 A draft of the minutes will be sent to the Board members following the proceedings. Any comments must be reported to the general manager prior to the next meeting of the Board of Directors. To the extent possible, the minutes will be approved and signed at the first meeting of the Board of Directors following the meeting in question.
3.8.5 Board members not participating in the proceedings will be made aware of the resolutions passed.