Orkla’s principles for good corporate governance aim to provide the basis for long-term value creation, to the benefit of shareholders, employees and society at large. These principles cannot replace efforts to promote a sound corporate business culture, but must be viewed in conjunction with them. Openness, transparency, accountability and equal treatment underpin confidence in the Orkla Group, both internally and externally.
1. Statement of policy on corporate governance
Orkla is subject to corporate governance reporting requirements under section 3-3b of the Norwegian Accounting Act and the Norwegian Code of Practice for Corporate Governance, cf. section 7 on the continuing obligations of stock exchange listed companies. The Accounting Act may be found (in Norwegian) at www.lovdata.no. The Norwegian Code of Practice for Corporate Governance, which was last revised on 21 October 2011, may be found at www.nues.no.
This statement of policy will be an item of business at Orkla’s Annual General Meeting on 19 April 2012. The company’s auditor has assessed whether the information provided in this statement with regard to section 3-3b of the Accounting Act is consistent with the information provided in the annual financial statements. The auditor’s statement is included here.
The Board of Directors at Orkla actively adheres to good corporate governance standards and will at all times ensure that Orkla complies with the requirements of section 3-3b of the Accounting Act and the Norwegian Code of Practice for Corporate Governance. This is done by ensuring that the topic of good governance is an integral part of the decision-making process in matters dealt with by the Board. Moreover, Orkla’s corporate governance principles are subject to annual assessment and discussion by the Board, which has also considered the text of this chapter at a Board meeting.
The following section is structured in the same way as the Code of Practice, covers each point of the Code and describes Orkla’s compliance efforts.
Orkla is committed to promoting sustainable social development by operating in compliance with responsible business principles, systematically improving its operations in relation to the external environment, climate and energy resources and investing in profitable business projects that can generate positive ripple effects for society. The Group’s attitudes towards corporate responsibility have been defined in the Orkla Goals and Values, Orkla’s Employee Code of Conduct and corporate responsibility guidelines. The latter two documents were revised in the course of 2011. The documents may be found on Orkla’s website under “Sustainability”, and are described in further detail in Orkla’s Sustainability Report, which also gives an account of the Group’s efforts to address important corporate responsibility issues in 2011.
Account is taken in this statement of information which Orkla is required to provide under section 3-3b of the Norwegian Accounting Act regarding reporting on corporate governance, and the information is structured in accordance with the Code of Practice where it is logical to do so. The following specifies where the items on which information must be disclosed under section 3-3b of the Accounting Act may be found:
- “a statement of the recommendations and regulations concerning corporate governance that the enterprise is subject to or otherwise chooses to comply with”: section 1 of the Code of Practice, Statement on policy on corporate governance.
- “information on where the recommendations and regulations mentioned in no. 1 are available to the public”: section 1 of the Code of Practice, Statement on policy on corporate governance.
- “the reason for any non-conformation with recommendations and regulations mentioned in no. 1”: There are two non-conformances with the Code of Practice which are described in further detail in italics under section 6, General Meetings, and section 14, Takeovers.
- “a description of the main elements in the enterprise’s, and for entities that prepare consolidated financial statements, if relevant also the Group’s internal control and risk management systems linked to the financial reporting process”: section 10 of the Code of Practice, Risk Management and internal control.
- “Articles of Association which entirely or partly expand on or depart from provisions of Chapter 5 of the Public Limited Liability Companies Act: section 6 of the Code of Practice, General Meetings.
- “the composition of the Board of Directors, the Corporate Assembly, the Committee of Shareholders’ Representatives and the Control Committee and any working committees related to these bodies, as well as a description of the main instructions and guidelines that apply to the work of the bodies and any committees”: section 8 of the Code of Practice, The Corporate Assembly and the Board of Directors, composition and independence, and section 9, The work of the Board of Directors.
- “Articles of Association governing the appointment and replacement of Directors”: section 8 of the Code of Practice, The Corporate Assembly and the Board of Directors, composition and independence.
- “Articles of Association and authorisations empowering the Board of Directors to decide that the enterprise is to buy back or issue its own shares or equity certificates”: section 3 of the Code of Practice, Equity and dividends.
Orkla’s mission statement reads as follows: “The objectives of the company are to engage in activities comprising industry, commerce, forestry, transport, finance, the acquisition and sale of securities and other investments, the purchase, sale, development and management of real estate, the publication of newspapers, magazines and other media, services and any other activity connected with the aforementioned objectives. The activities are conducted by the company itself or by its subsidiaries in Norway and abroad.”
In accordance with its mission statement, Orkla operates in several areas. The Group’s main focus is on household branded consumer goods, aluminium solutions, renewable energy, materials and financial investments. In 2011, Orkla announced that the Group in future will focus on and allocate its resources to branded consumer goods operations. The other businesses were declared to lie outside the Group’s priority areas and will be phased out in the long term. See "Message from the CEO" for more information. The Board of Directors will assess whether it is appropriate to propose adjusting the mission statement when such a phase-out has been completed.
Orkla’s primary goal is “Developing people – creating value”. Orkla aims to outperform and create greater value than its competitors and others with whom it is natural to compare the Group. Orkla will achieve this objective by sharpening its business focus and strengthening its consumer orientation. Further information on the Group’s goals and main strategies, and the goals and main strategy of each business area, may be found on the Orkla website under “About Orkla”.
3. Equity and dividends
As of 31 December 2011, Group equity totalled NOK 34.4 billion which is a reduction of around NOK 12.5 billion. This change is mainly ascribable to dividends paid and a negative comprehensive result for the year. An ordinary dividend of NOK 2.50 per share was paid out in the 2010 accounting year and an extraordinary dividend of NOK 5.00 per share was paid out in 2011. Orkla has pursued a consistent shareholder and dividend policy for many years. Over time, Orkla shareholders shall receive a competitive return on their investment through a combination of dividends and an increase in the share price. The Board of Directors has proposed that a dividend of 2.50 per share be will paid for 2011. The dividend will be paid out on 3 May to shareholders of record on the date of the Annual General Meeting.
The Board of Directors’ authorisations to increase share capital and to undertake share buybacks are limited to specific purposes and are granted for a period no longer than until the next general meeting. The General Meeting is given the opportunity to vote on every purpose covered by the authorisation.
At the Annual General Meeting in 2011, the Board of Directors was authorised to increase the share capital by means of new share subscriptions to a total value of up to NOK 90 million divided between a maximum of 72,000,000 shares, each with a par value of NOK 1.25. The object of this authorisation is to simplify the process in the event it becomes relevant to further develop the Group’s priority areas by acquiring companies in return for consideration in the form of new shares or by increasing share capital through private placings. The authorisation may be used in connection with one or more share issues. Similar authorisations have regularly been granted by previous General Meetings. The Board has not proposed to renew this authorisation.
At the same general meeting, the Boardwas also authorised to buy back up to 100,000,000 Orkla shares so that the company can acquire and hold up to 10% of its share capital. The authorisation is limited to specific purposes, and applies until the Annual General Meeting in 2012. Shares acquired under this authorisation are to be cancelled or used in connection with employee incentive programmes, including the Group’s employee share purchase programme. Each purpose was discussed as a separate item of business at the Annual General Meeting. A similar authorisation has been granted each year since 1998, and in the past five years Orkla has on average bought back 0.4% of outstanding shares each year. In 2011, Orkla acquired 3,800,000 of its own shares, which the Board proposes to the General Meeting to cancel. As of 31 December 2011, Orkla owned 8,920,791 treasury shares.
The company’s transactions in its own shares are effected on the market at market price, in accordance with good stock exchange practice in Norway. There are otherwise no provisions in Orkla’s Articles of Association that govern the buyback or issue of shares.
4. Equal treatment of shareholders and transactions with related parties
Orkla has one class of share and each share entitles the holder to one vote. Each share has a nominal value of NOK 1.25. Further information on voting rights at general meetings is provided under point 6 "General Meetings".
The company’s policy is not to dilute the shareholdings of existing shareholders. In accordance with this policy, there have been no real share capital increases in the company in recent years. Should the Board of Directors wish to propose to the General Meeting that a departure be made from the pre-emptive right of existing shareholders in the event of a capital increase, such a proposal will be justified by the common interests of the company and the shareholders, and the grounds for the proposal will be presented in the notice of the general meeting. In the event of a capital increase based on an authorisation granted by the General Meeting, the grounds for departing from the pre-emptive right will be set out in the stock exchange notification announcing the capital increase.
To avoid any detriment to the Group’s reputation, the Board considers it important to pursue a policy of transparency and caution in connection with investments that could be perceived as an unfortunately close involvement, or close relationship, between the company and a member of the Board, executive management or parties related thereto. Procedural rules for such transactions have therefore been drawn up in the Rules of Procedure for the Board of Directors, which may be found on Orkla’s website under “Investor Relations”. According to the Rules of Procedure, the Board Chair must be informed of such transactions and must decide how the matter should be dealt with. If the matter concerns the Board Chair, this duty is incumbent upon the Deputy Chair of the Board.
Further information on transactions between related parties is provided in Note 38 to the consolidated financial statements. In the event of not insignificant transactions between the company and shareholders, a shareholder’s parent company, Board members, executive management or parties related thereto, the Board of Directors will ensure that a valuation is carried out by an independent third party. The Board will similarly arrange for a valuation by an independent third party in the event of not insignificant transactions between companies within the Group where there are minority shareholders.
The Rules of Procedure further establish that a Board member must not take part in the consideration of or a decision on an issue that is of such importance to himself or herself or to any related party that the member must be considered to have an obvious personal or financial interest in the matter. It is incumbent upon each Board member to consider on an ongoing basis whether there are matters which, from an objective point of view, are liable to undermine the general confidence in that Board member’s independence and impartiality, or which could give rise to conflicts of interest in connection with the Board of Directors’ consideration of the matter. Such matters must be taken up with the Board Chair. According to the Group’s Employee Code of Conduct, employees must on their own initiative inform their superior if they should recuse themselves from dealing with or have a conflict of interest in connection with a matter, and consequently should not take part in considering such matters. Instructions have also been drawn up for the private investments of specific employees. These instructions are intended, among other things, to prevent the occurrence of such conflicts of interest, and they contain rules regarding the duty of employees to exercise due diligence in connection with their private investments, obtain prior approval for and report such investments.
5. Freely negotiable shares
All Orkla shares carry equal rights and are freely negotiable. No special limitations on transactions have been laid down in Orkla’s Articles of Association. Article 3, second paragraph, of the Articles of Association states that “The Board of Directors may entirely or partly refuse to approve the transfer of shares if the company pursuant to statute or to regulations laid down pursuant to statute is given the discretionary right to refuse such approval or to apply other restrictions on sales”. In this connection, it should be noted that the provisions of the Industrial Licensing Act requiring Board consent for acquisitions of shares representing more than 20% of all shares in the company are applicable, due to Orkla’s ownership interests in waterfalls. Transactions in the Orkla share are described in more detail on Orkla’s website under “Investor Relations”.
6. General meetings
Orkla seeks to ensure that as many shareholders as possible are able to exercise their rights by participating in general meetings, and that the general meeting is an effective meeting place for shareholders and the Board of Directors. The Annual General Meeting is held every year before the end of May. Notices of general meetings and related documents are made available on Orkla’s website at the latest 21 days prior to the date of the meeting. The final date for giving notice of attendance is three working days prior to the general meeting. Shareholders are given the opportunity to vote on the election of every single candidate to an office in the Nomination Committee and in the Corporate Assembly. The auditor, Board of Directors and Nomination Committee are present at general meetings.
Under the Articles of Association, general meetings are chaired by the Chair of the Corporate Assembly, or in his or her absence, by the Deputy Chair. The Chair of the Corporate Assembly satisfies the requirements of the Norwegian Code of Practice for Corporate Governance regarding independence.
The voting right for a transferred share may be exercised when the transfer has been recorded by the Norwegian Central Securities Depository within the time limit for giving notice of attendance at the general meeting, or if the share acquisition has been notified to the Depository and proof of the acquisition is presented at the general meeting. Under Norwegian law, only shares that are registered in the name of the shareholder may be voted. Shares that are registered in a nominee account must be reregistered in the Depository within the time limit for notice of attendance at the general meeting in order for the shareholder to be able to vote the shares. Shareholders who are unable to attend the general meeting may vote by proxy. Orkla will appoint the Board Chair or a meeting chair to vote for shareholders as their proxy. The proxy form is designed in such a way that voting instructions may be given for each matter that is to be considered and for the candidates who are to be elected. Further information regarding use of proxies and shareholders’ right to submit items of business for consideration at general meetings is provided in the notice of the general meeting and on Orkla’s website.
Under Article 16, second paragraph, of the Articles of Association, the Board of Directors may decide that documents concerning items of business to be considered at the general meeting are not to be sent to shareholders, provided they are made available on the company’s website. This also applies to documents which by law must be included in or attached to the notice of the general meeting. A shareholder may nonetheless request that documents pertaining to items of business to be considered at the general meeting be sent to him or her. The provision in the Articles of Association departs from the general rule laid down in Chapter 5 of the Public Limited Liability Companies Act which prescribes that the annual financial statements, the report of the Board of Directors, the auditor’s report, the statements of the Corporate Assembly pursuant to section 6-37, third paragraph, and the Board of Directors’ statement of guidelines for the remuneration of the executive management pursuant to section 6-16a must be sent to all shareholders no later than one week before the general meeting.
Members of the Board of Directors are present at general meetings, but normally not the entire Board has attended. No items of business at general meetings have made this necessary to date. The Board Chair, the general manager and the heads of the various business areas are always present in order to reply to any questions that may be raised.
7. The Nomination Committee
Under the Articles of Association, Orkla has a Nomination Committee that is elected by the General Meeting, and the General Meeting adopted further guidelines for the Nomination Committee in 2010. The instructions for the Nomination Committee may be found on Orkla’s website under “Investor Relations”. The Nomination Committee consists of two to five members, who are elected for a term of up to two years. The General Meeting elects the Chair and members of the Nomination Committee and determines its remuneration. The Committee is tasked with submitting the following reasoned recommendations:
Recommendation to the General Meeting
- Election of shareholder-elected members and deputy members to the company’s Corporate Assembly
- Election of members to and the Chair of the Nomination Committee
- Determination of the remuneration of the Corporate Assembly and the Nomination Committee
Recommendation to the Corporate Assembly
- Election of the Chair and Deputy Chair of the Corporate Assembly
- Election of the Chair and Deputy Chair of the Board of Directors. (For this purpose, the Nomination Committee is supplemented by a representative appointed by the employee-elected members of the Corporate Assembly.)
- Determination of the remuneration of the Board of Directors
Recommendation to the shareholder-elected members of the Corporate Assembly
- Election of shareholder-elected members to the Board of Directors
The instructions for the Nomination Committee contain further guidelines for the preparation and implementation of elections to the Nomination Committee, the Corporate Assembly and the Board of Directors, as well as criteria for eligibility, general requirements regarding recommendations, the number of members in the Committee, the term of service and detailed procedural rules for the work of the Nomination Committee.
Information regarding the composition of the Nomination Committee, which members are up for election and how input and proposals can be submitted to the Committee is posted on Orkla’s website under “Investor Relations”.
The composition of the Nomination Committee is intended to ensure that the interests of all the shareholders are served, and meets the requirement of the Norwegian Code of Practice for Corporate Governance as regards independence of the company’s management, Board of Directors and Corporate Assembly. One of the Committee members is not a member of the Corporate Assembly, and none of the members of the Nomination Committee are a member of the Board of Directors of Orkla ASA. Neither the general manager nor other senior executives are members of the Nomination Committee. Information regarding the composition of the Nomination Committee and the number of Orkla ASA shares owned by each member of the Committee as of 31 December 2011 may be found here.
8. The Corporate Assembly and the Board of Directors, composition and independence
Under the Public Limited Liability Companies Act and Article 10 of Orkla’s Articles of Association, it is the task of the Corporate Assembly to exercise control and oversight of the company and the Board of Directors, and to elect the Board of Directors and the Board Chair. It also elects the Deputy Chair of the Board of Directors. As prescribed by law, the Corporate Assembly elects its Chair and has a permanent Deputy Chair. The Corporate Assembly normally convenes three times a year, and its composition is intended to ensure that it represents a broad cross-section of the company’s shareholders. As from 2008, the General Meeting determined that shareholder-elected members and deputy members are to serve a term of one year, based on the rationale that an annual assessment of the overall composition of the Corporate Assembly will ensure greater flexibility.
The composition of the Board of Directors is intended to serve the interests of all the shareholders and meet the company’s need for competence, capacity and diversity. The Board’s composition meets the requirements of the Norwegian Code of Practice for Corporate Governance as regards Board members’ independence of the company’s executive management, main shareholders and material business relationships. Two of the Board members are defined as non-independent of the company’s main shareholders, and all the Board Members are defined as independent of the company management or material business relationships. There are few instances in which Board members are disqualified from considering Board matters. Representatives of the executive management are not members of the company’s Board of Directors.
Under Article 4 of Orkla’s Articles of Association, the Chair, the Deputy Chair and the other shareholder-elected members of the Board may be elected for a term of up to two years. Since 2007, however, the Nomination Committee has practised a term of one year for shareholder-elected members and deputy members, on the grounds that an annual assessment of the overall composition of the Board will ensure greater flexibility. There are no other provisions in the Articles of Association governing the appointment and replacement of Board members, except for Article 10, which prescribes further rules for appointing a new Board member or a substitute if a Board member is prevented from serving for a long period of time or dies.
Further pursuant to Article 4 of Orkla’s Articles of Association, the shareholder-elected members of the Board of Directors are required to own shares in the company with a view to strengthening the shared financial interests of shareowners and Board members. A more detailed description of the number of Orkla shares owned by each member of the Board, their background, qualifications, term of service and independence, how long they have been an Orkla Board member and any significant functions in other companies and organisations is provided under "The Board of Director's". Information regarding each Board member’s attendance at Board meetings is provided here.
Under Norwegian law and in accordance with Orkla’s current system of corporate democracy, Group employees have the right to elect seven of the 21 members of the Corporate Assembly of Orkla ASA. Similarly, Group employees have the right to elect three members to the Board of Directors of Orkla ASA, and two observers. A description of the composition of the company’s governing bodies is also provided here.
9. The work of the Board of Directors
Tasks of the Board of Directors
The tasks of the Board of Directors are laid down in the Rules of Procedure for the Board of Directors, which govern the Board’s responsibilities and duties and the administrative procedures of the Board, including which matters are subject to Board consideration and rules for convening and holding meetings.The Board’s Rules of Procedures also contain rules regarding the general manager’s duty to inform the Board about important matters, and to ensure that Board decisions are implemented, see to it that company employees and other parties involved are adequately informed of Board decisions, and see to it that the guidelines for preparing matters for Board consideration are followed. The Board’s other instructions and clarification of duties, authorisations and responsibilities to the general management are provided through routine communication.
The Board of Directors adopts an annual meeting and activity plan that covers strategic planning, business issues and oversight activities. The Board’s activity plan for 2011 stipulated 8 meetings, including a two-day meeting to deal with strategic issues. In addition to this, the Board has held 3 meetings; a total of 11 meetings were thus held in 2011, at which the Board dealt with a total of 85 items of business. The content of the Board’s work is discussed in further detail in the Directors’ Report.
Board matters are prepared by the general manager in consultation with the Board Chair. The Rules of Procedure for the Board of Directors contain provisions regarding procedural rules in connection with disqualification, joint investments and parallel investments. This is described in further detail under point 4 “Equal treatment of shareholders and transactions with related parties”.
The Board of Directors has established two permanent Board Committees, which are described in further detail below. These committees do not make decisions, but supervise the work of the company management on behalf of the Board and prepare matters for Board consideration within their specialised areas. In this preparatory process, the committees have the opportunity to draw on company resources, and to seek advice and recommendations from sources outside the company.
The Compensation Committee
The Compensation Committee is chaired by the Board Chair, Stein Erik Hagen, and its other members are Åse Aulie Michelet and Aage Andersen. The Group’s assistant HR-director is the committee secretary. The composition of the committee meets the requirements of the Norwegian Code of Practice for Corporate Governance as regards independence, and all the committee members are considered to be independent of executive management. The mandate of the committee is set out in the Rules of Procedure for the Board of Directors and is in brief as follows:
- 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 latter’s terms of employment
- Prepare for consideration matters of principle relating to levels of pay, bonus systems, pension terms, employment contracts and the like for senior Orkla executives
The committee will otherwise deal with special questions relating to compensation for Group employees insofar as the committee finds that these questions concern matters of particular importance for the Group’s competitive position, image, recruitment ability, etc.
The Audit Committee
The Audit Committee is chaired by Jesper Ovesen, and the other members are Peter A. Ruzicka and Gunn Liabø. The Chief Internal Auditor is the secretary of the Audit Committee. The composition of the committee meets the requirements of the Norwegian Code of Practice for Corporate Governance as regards independence and competence. The Nomination Committee’s recommendation of candidates for election to the Board also contains information as to which Board members satisfy the requirements as regards independence and competence to sit on the Audit Committee. The committee’s mandate is set out in the Board’s Rules of Procedure and in brief is as follows:
- Ascertain that internal and external accounting reporting processes are organised appropriately and carried out efficiently, and are of high professional quality
- Keep under review the effectiveness and relevance of the work of the internal audit staff and of the company’s risk management systems
- Monitor and assess the quality of the statutory audit of Group companies and the Group’s financial statements
- Help to ensure the independence of the external auditor, and ensure compliance with the rules and guidelines that apply at any given time regarding the provision of additional services by the auditor to the Group or Group companies
- Initiate investigations, if necessary, and propose measures relating to the above-mentioned points
- Annually review and, if necessary, update its mandate, and submit its recommendations concerning its mandate to the Board of Directors
The Board of Directors’ self-evaluation
Each year, the Board of Directors carries out an evaluation of its own activities and competence, and discusses improvements in the organisation and implementation of its work, both at individual level and as a group, in relation to the goals that were set for its work. The results are made available to the Nomination Committee. An external person is used at regular intervals to facilitate the Board’s self-evaluation.
10. Risk management and internal control
A prerequisite for Orkla’s system of decentralised responsibility is that the activities in every part of the Group meet general financial and non-financial requirements, and are carried out in accordance with the Group’s common norms and values. The executive management of each company is responsible for risk management and internal control in the company with a view to ensuring:
- Exploitation of business opportunities
- Targeted, safe, high-quality and cost-effective operations
- Reliable financial reporting
- Compliance with current legislation and regulations
- Operations in accordance with Orkla’s governing documents, including ethical and corporate responsibility standards
Orkla’s risk management system is fundamental to the achievement of these goals.
To ensure ongoing risk monitoring in individual companies, all boards of operational subsidiaries are required to carry out a thorough analysis of the company’s risk picture and internal control function at least once a year, in addition to the risk analysis that is an integral part of the company’s decision-making processes.
The Group’s Chief Risk Officer
The Group’s Chief Risk Officer (CRO) must help ensure that all risk that is significant for Orkla’s goals is identified, analysed, effectively dealt with and exploited across business areas and professional disciplines. This entails, among other things:
- Continuously monitoring important risk indicators in order to reassess the Group’s level of risk, if necessary
- Identifying, communicating and monitoring risk factors that are critical to the Group in order to ensure that adequate risk mitigation measures are in place
- Drawing up instructions and guidelines for risk management, emergency response and continuous operations
- Assisting in the implementation of coherent risk management in routine operations and in connection with projects and major decisions
- Presenting Orkla’s consolidated risk profile to the Group Executive Board, the Board of Directors and the Board’s Audit Committee
- Facilitating the transfer of best risk management practices throughout the Group
- Ensuring that formal risk assessments are uniformly carried out, presented, discussed and concluded by the Boards of the respective Group companies
- Carrying out detailed risk analyses in particularly exposed areas
- Ensuring that Orkla’s risk management is in accordance with relevant regulatory requirements and in the best interests of Orkla’s stakeholders
- Being responsible for selected measures to mitigate risk at Group level
In addition to the linear, ‘top-down/bottom-up’, risk management process based on the businesses’ value chain, a Risk Management Forum, chaired by the CRO, has been established in which risk managers from the various business areas meet once every quarter to exchange experience and know-how.
Risk identification is also an important tool in preventive environment, health and safety (EHS) efforts, and the Senior Vice President EHS ensures the systematic, continuous follow-up of this work. All companies and businesses report their ten main EHS risk factors and associated risk-mitigating measures as part of the annual reporting process.
As part of the Group’s internal control system, Orkla has an Internal Audit function, which works closely with the CRO and the external auditor. The responsibilities of the Group’s Internal audit function are as follows:
- Verify that internal control procedures which reduce risk have actually been established and are functioning as intended;
- Assist the Board of Directors, the Group Executive Board and the business areas by providing auditing expertise and capacity, which includes monitoring and control of selected companies in the Group;
- Be the recipient of and follow up on reports submitted under the Group’s whistle-blowing system for breaches of the Group’s Code of Conduct. Further information in this connection may be found on Orkla’s website under “Sustainability”
- Coordinate the choice of and monitor external auditors in the Group companies in accordance with the instructions of the Audit Committee
- Act as secretary to the Audit Committee
The Internal Audit Department is independent of the ‘line’, since the Chief Auditor reports to the Board’s Audit Committee and, in special cases, to the Chair of the Corporate Assembly.
Ethics and corporate responsibility
The Group’s businesses continuously focus on relevant topics related to ethics and corporate responsibility which are an integral part of the grounds on which the local businesses base their decisions. The Group monitors the business areas’ exercise of their corporate responsibility by means of an annual review of the status of current procedures and systems in the business area boards. The status of the business areas’ corporate responsibility work, including plans for the subsequent period, is also reported to the Group as part of the annual sustainability reporting process.
Orkla’s guidelines for ethics and corporate responsibility were revised in 2011 in order to enhance the Group’s efforts and ensure compliance with changes in external requirements in this field. In this connection, Orkla strengthened the requirements regarding systematic risk management in the Group companies. Each company is required to carry out an annual survey of risk factors related to the company’s corporate responsibility at a general level, and to introduce procedures for identifying the risk of breaches of Orkla’s ethical standards, including in connection with purchasing and investments. The requirements in the revised guidelines will be implemented by the Group companies in the period 2012-2013.
Orkla’s Sustainability Report for 2011 provides more detailed information on the Group’s procedures in this area.
The financial reporting process
The Orkla Group prepares and presents its financial statements in accordance with current IAS/IFRS rules.
The Group’s governing documents are collected in a web-based manual and contain requirements and procedures for the preparation and presentation of interim reports and year-end reports. A set of Orkla Accounting Standards has also been drawn up, in which Orkla’s ten main principles for financial reporting are set out. Financial information is reported through the Group’s common reporting system, Hyperion Financial Management (HFM). Every month, each company reports figures in HFM, based on output from its own Enterprise Resource Planning (ERP) systems. HFM has a general chart of accounts, and built-in control systems in the form of data check accounts and check reports designed to ensure that the information is consistent. The reporting is expanded in the year-end reporting process to meet various requirements for supplementary information.
The process of consolidating and checking financial data takes place at several levels in the business areas Orkla Brands, Sapa, Borregaard, Hydro Power and Orkla Financial Investments, in accordance with Orkla’s decentralised management model.
Training and further development of accounting expertise within the Group is provided at the central level through the Orkla Finance Seminar, the Orkla Finance Academy, Year-End Reporting Day, HFM courses and the Orkla Accounting Committee. This training is offered in addition to the training provided by the various business areas/units.
11. Remuneration of the Board of Directors
All remuneration of the Board of Directors is disclosed in Note 11 to Orkla ASA’s financial statements. The note shows that remuneration of the Board of Directors is not linked to the Group’s performance and that no options have been issued to Board members.
12. Remuneration of the executive management
The Board’s Compensation Committee presents a recommendation concerning the terms and conditions for the President and CEO to the Board of Directors and monitors the general terms and conditions for other senior executives of the Group. The Board assesses the President and CEO and his terms and conditions once a year.
A description of the remuneration of the executive management and the Group’s conditions policy, including the scope and organisation of bonus and share-price-related programmes, is given in the Board of Directors’ statement of guidelines for the remuneration of executive management; see Note 6 to Orkla ASA’s financial statements. It is also stated here that a ceiling has been set for performance-related remuneration. The Board of Directors’ statement of guidelines is considered by the Corporate Assembly and made available to shareholders together with the notice of the Annual General Meeting.
13. Information and communications
Orkla seeks to ensure that its accounting and financial reporting are worthy of the confidence of investors. Orkla’s accounting procedures are highly transparent and since 2005 Orkla has prepared and presented its financial statements in accordance with the International Financial Reporting Standards (IFRS). The Board of Directors’ Audit Committee monitors the company’s reporting on behalf of the Board.
Orkla strives to communicate actively and openly with the market. The company’s annual and quarterly reports contain extensive information on the various aspects of the company’s activities. The company’s quarterly presentations are webcast directly and may be found on Orkla’s website, along with the quarterly and annual reports, under “Investor Relations”. In 2011, the company’s Annual General Meeting was webcast and simultaneously interpreted to English. Orkla has held a Capital Markets Day every other year, on which occasion the market is given an in-depth review of the Group’s strategic direction and operational development. The Capital Markets Day presentations are webcast directly on the company’s websites.
In addition, Orkla arranges excursions for analysts and investors to selected Orkla factories so as to better acquaint the market with Orkla’s operations. All shareholders and other financial market players are treated equally as regards access to financial information. The Group’s Investor Relations Department maintains regular contact with company shareholders, potential investors, analysts and other financial market stakeholders. The Board is regularly informed of the company’s investor relations activities. The financial calendar for 2012 may be found under “Investor Relations”.
The Board of Directors will not seek to hinder or obstruct any takeover bid for the company’s operations or shares unless there are particular reasons for doing so. In the event of such a bid, as discussed in section 14 of the Norwegian Code of Practice for Corporate Governance, the Board of Directors will, in addition to complying with relevant legislation and regulations, seek to comply with the recommendations in the Code of Practice. This includes obtaining a valuation from an independent expert. On this basis, the Board will make a recommendation as to whether or not the shareholders should accept the bid. There are no other written guidelines for procedures to be followed in the event of a takeover bid.
The Group has not found it appropriate to draw up any explicit basic principles for Orkla’s conduct in the event of a takeover bid, other than the actions described above. The Board of Directors otherwise concurs with what is stated in the Code of Practice regarding this issue.
The Board of Directors has determined the procedure for the external auditor’s regular reporting to the Board. Each autumn, the external auditor presents to the Board his assessment of risk, internal control and the quality of financial reporting at Orkla, at the same time presenting his audit plan for the following year. The external auditor also takes part in the Board’s discussions on the annual financial statements. On both occasions, the Board of Directors ensures that it is able to discuss relevant matters with the auditor without the presence of the management. The external auditor and the President and CEO attend all meetings of the Board’s Audit Committee. For information regarding the work of the internal auditor, reference is made to the section above on risk management and internal control.
Orkla has established guidelines for the right of the general management to use the external auditor for services other than auditing. Responsibility for monitoring such use in detail has been delegated to the secretary of the Audit Committee, who is the Chief Internal Auditor. The secretary of the Audit Committee approves all significant assignments in advance and receives an annual summary from the external auditor of services other than auditing that have been provided to Orkla. His annual report to the Audit Committee and the Board of Directors includes special comments on these services. Details of the company’s use and remuneration of the external auditor are disclosed in Note 6 to the financial statements of Orkla ASA. Both the Corporate Assembly and the General Meeting are informed about the Group’s overall remuneration of the auditor, broken down in accordance with statutory requirements into remuneration for statutory auditing and remuneration for other services.
In connection with the auditor’s participation in the Audit Committee and the Board of Directors’ consideration of the annual financial statements, the auditor also confirms his independence.