NORWEGIAN CODE OF PRACTICE
The following is a detailed discussion of each individual section of the Norwegian Code of Practice for Corporate Governance based on the latest revision dated 4 December 2007. Each section starts by reiterating the text of the Code. This is followed by a description of KONGSBERG's compliance. For the full annotated Code of Practice, see the Oslo Stock Exchange's website at www.oslobors.no/ob/cg or NUES (Norwegian Corporate Governance Committee): www.nues.no
The description is generally structured in accordance with the Code of Practice. As recommended, a greater degree of detail is provided on certain points. Point 16, 'Management and in-house procedures', is not covered by the Code of Practice, but it has been included because it is considered crucial to KONGSBERG's discussion of corporate governance.
- The board of directors must ensure that the company implements sound corporate governance.
- The board of directors must provide a report on the company's corporate governance in the annual report. The report must cover every section of the Code of Practice. If the company does not fully comply with Code of Practice, this must be explained in the report.
- The board of directors should define the company's basic corporate values and formulate ethical guidelines in accordance with these values.
The Group has drawn up a special policy for corporate governance, and the Board has decided that 'the Norwegian Code of Practice for Corporate Governance' is to be observed. There is a discussion and clarification of the Group's value platform in the sustainability section of this report, on the section "Our Values" and at www.kongsberg.com.
The Group has drawn up its own corporate Code of Ethics, most recently revised in April 2008. For more details, see the commentary on section "Corporate Social Responsibility – Ethics", and www.kongsberg.com.
Departures from the Code of Practice: Ingen.
- The company's business should be clearly defined in its articles of association.
- The company should have clear objectives and strategies for its business within the scope of the definition of its business in its articles of association.
- The annual report should include the business activities clause from the articles of association and describe the company's objectives and principal strategies.
"The object of Kongsberg Gruppen ASA is to engage in technological and industrial activities in the maritime, defence and related sectors. The Company may participate in and own other companies." These sentences appear in §3 of KONGSBERG's Articles of Association. The company's Articles of Association can be found under the heading "Articles of Association for Kongsberg Gruppen ASA" of the Annual Report and on the Group's website at www.kongsberg.com. The Group's objectives and principal strategies are discussed on the section "Vision, Objectives and Strategy".
Departures from the Code of Practice: Ingen.
- The company should have equity capital at a level appropriate to its objectives, strategy and risk profile.
- The board of directors should establish a clear and predictable dividend policy as the basis for the proposals on dividend payments that it makes to the general meeting. The dividend policy should be disclosed.
- Mandates granted to the board of directors to increase the company's share capital should be restricted to defined purposes and should be limited in time to no later than the date of the next annual general meeting. This should also apply to mandates granted to the board for the company to purchase its own shares.
Equity
The Board considers consolidated equity to be satisfactory. The company's need for financial strength is considered at any given time in the light of its objectives, strategy and risk profile.
Dividend policy
The Group will normally strive to achieve an annual dividend of 30 per cent of its annual profit from ordinary operations, after tax.
The Annual General Meeting (AGM) stipulates the annual dividend, based on the Board's recommendation. The proposal is the ceiling for what the AGM can adopt.
Capital increase
The Board is not authorised to undertake share issues.
Purchase of treasury shares
The AGM can authorise the Board to purchase up to 10 per cent of its own shares. On 8 May 2007, the ordinary AGM authorised the Board of Directors to purchase treasury shares for up to the nominal sum of NOK 7 500 000. This comes to 5 per cent of the share capital. The mandate can be used several times and applies for 12 months from the date of the AGM. Pursuant to this mandate, the Board's acquisition of treasury shares can be exercised only between a minimum price of NOK 100 and a maximum price on NOK 300 per share. At 31 December 2007, the Group owned a total of 18 585 shares, or 0.06 per cent of the total number of shares in the Group.
The shares were purchased for the share scheme for all employees, but they can also be sold on the market. Offered to all employees at a discount (-20 per cent), the shares are subject to a one-year lock-in period from the date of acquisition.
Departures from the Code of Practice: None.
- The company should have only one class of shares.
- Any decision to waive the pre-emption rights of existing shareholders to subscribe for shares in the event of an increase in share capital must be justified.
- Any transactions the company carries out in its own shares should be carried out either through the stock exchange or at prevailing stock exchange prices if carried out in any other way. If there is limited liquidity in the company's shares, the company should consider other ways to ensure equal treatment of all shareholders.
- In the event of any material transactions between the company and shareholders, members of the board of directors, members of the executive management or close associates of any such parties, the board should arrange for a valuation to be obtained from an independent third party. This will not apply if the transaction requires the approval of the general meeting pursuant to the requirements of the Public Companies Act. Independent valuations should also be arranged in respect of transactions between companies in the same group where any of the companies involved have minority shareholders.
- The company should have guidelines to ensure that members of the board of directors and the executive management notify the board if they have any material direct or indirect interest in any transaction entered into by the company.
Class of shares
KONGSBERG's shares are all Class A shares. The Articles of Association place no restrictions on voting rights. All shares are equal.
Trading in treasury shares
The Board's mandate to acquire treasury shares is based on the assumption that acquisition will take place on the market. Acquired shares may be disposed of on the market, as payment for acquisitions, or through the share scheme for employees.
Transactions with close associates
In the Board's opinion, in 2007 there have been no transactions between the company and a shareholder, director, executive management or a party closely related to such individuals that can be described as significant. See also Note 32.
Guidelines for directors and corporate management
The corporate Code of Ethics discusses the topic under the heading 'conflict of interest', without this being said to be directly equivalent to the point in the Code of Practice. Similarly, section 11 of the Board's instructions "Independence and disqualification", apply.
The State as customer and shareholder
The Norwegian state owns a 50.001 per cent stake in KONGSBERG at the same time as it is a major account, especially with a view to deliveries to the Norwegian Armed Forces. Relations with the Armed Forces are purely of a commercial nature and are not affected by the ownership structure.
The Group has quarterly meetings with the State, as represented by the Ministry of Trade and Industry. The topics discussed at these meetings are first and foremost the Group's economic development and there are briefings on strategic questions related to KONGSBERG. The State's expectations regarding investment performance and yield are also communicated. These 'one-on-one' meetings with the State are comparable to what is customary between a private company and its principal shareholders. The meetings comply with the provisions specified in company and securities legislation, not least with a view to equal treatment of shareholders.
As a shareholder, the State does not usually have access to more information than what is available to other shareholders. Under certain circumstances, where the State's participation is imperative and the Government must obtain an authorisation from the Storting, from time to time, it will be necessary to give the Ministry insider information. In such cases, the State is subject to the general rules that apply to dealing with such information.
Departures from the Code of Practice: None.
- Shares in listed companies must, in principle, be freely negotiable. Therefore, no form of restriction on negotiability should be included in a company's articles of association.
The shares are freely negotiable, with the exception of shares purchased by employees at a discount, see point 3. The Articles of Association place no restrictions on negotiability.
Departures from the Code of Practice: None.
- making the notice calling the meeting and the support information on the resolutions to be considered at the general meeting, including the recommendations of the nomination committee, available on the company's website no later than 21 days prior to the date of the general meeting, and sending this information to shareholders no later than two weeks prior to the date of the general meeting
- ensuring that the resolutions and supporting information distributed are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting
- the deadline is set as close to the date of the meeting as possible
- shareholders who cannot attend the meeting in person can vote by proxy
- the board of directors and the nomination committee and the auditor are present at the general meeting
- arrangements have been made to ensure an independent chairman for the general meeting
- the procedure for representation at the meeting through a proxy, including a form to appoint a proxy
- shareholders' right to propose motions for the consideration of the general meeting
- the web site featuring the notice and other relevant documents will be accessible
- information on the right of shareholders to propose matters to be considered by the general meeting
- proposals for motions, alternatively comments on items where no motion is proposed
- a form for appointing a proxy
By virtue of the Annual General Meeting (AGM), the shareholders are guaranteed participation in the Group's supreme governing body. The AGM adopts the Articles of Association. Shareholders representing at least 5 per cent of the shares can call for extraordinary general meetings.
Notice calling the annual general meeting
An AGM will ordinarily be held by 1 June each year. The 2008 AGM is scheduled for 24 April. Notification is usually sent out three weeks in advance. That is one week earlier than the statutory minimum requirement (two weeks). The relevant documents are available on the Group's website at least 21 days prior to date of the general meeting. It is important that the documents contain all the information necessary for the shareholders to take a position on all items up for discussion. The company's Articles of Association stipulate that the final date for registration cannot expire less than five days prior to the date of the general meeting. Efforts are made to set the deadline as close to the meeting date as possible.
The Financial Calendar is published on the Group's website and in its annual report.
Participation
It is possible to register by post, telefax or E-mail. The Board tries to make it possible for as many shareholders as possible to participate. Shareholders who cannot attend the meeting are urged to authorise a proxy, and the system facilitates the use of proxies on each individual item for discussion. Representatives of the Board, at least one representative of the Nominating Committee and the auditor participate in general meetings. Management is represented by the Chief Executive Officer and the Chief Financial Officer, at least.
In 2007, 79 per cent (79 per cent in 2006) of the aggregate share capital was represented.
Agenda and execution
The agenda is set by the Board, and the main items on the agenda are specified in §8 of the Articles of Association. The same paragraph stipulates that the Chair of the Board will chair the AGM. The CEO will review the status of the Group. The minutes of the AGM are made available on the Group's website at: www.kongsberg.com.
Departures from the Code of Practice: There are two departures on this point. The entire Board has not usually attended the AGM. Thus far, the items on the agenda for the AGM have not required this. The chair of the Board is always present to respond to any questions. The other departure refers to §8 of the Articles of Association, which specifies that general meetings are to be chaired by the Chair of the Board. This is a departure from the Code of Practice regarding independent chairing of meetings.
- The company should have a nomination committee, and the general meeting should elect the chairperson and members of the nomination committee and should determine the committee's remuneration.
- The nomination committee should be laid down in the company's articles of association.
- The members of the nomination committee should be selected to take into account the interests of shareholders in general. The majority of the committee should be independent of the board of directors and the executive management. At least one member of the nomination committee should not be a member of the corporate assembly, committee of representatives or the board. No more than one member of the nomination committee should be a member of the board of directors, and any such member should not offer himself for re-election. The nomination committee should not include the company's chief executive or any other representative of the company's executive management.
- The nomination committee's duties are to propose candidates for election to the corporate assembly and the board of directors and to propose the fees to be paid to members of these bodies.
- The nomination committee should justify its recommendations.
- The company should provide information on the membership of the committee and any deadlines for submitting proposals to the committee.
The Nominating Committee's duty is to nominate candidates for the shareholder-elected directors' seats to the AGM. The Chair of the Board of Directors shall be nominated separately.
The Nominating Committee shall consist of three members who shall be shareholders or representatives of shareholders. The AGM shall elect all members of the Nominating Committee, including the chair. The Nominating Committee itself proposes to the AGM a roster of candidates for the Committee. The term of office is two years. The above-mentioned is stated in §9 of the Group's Articles of Association, based on amendments adopted by the ordinary Annual General Meeting on 8 May 2007.
The Committee works under instructions from the AGM which were revised most recently at the ordinary Annual General Meeting on 8 May 2007.
Composition
The current Committee was elected by the ordinary AGM on 9 May 2006 and consists of:
- Anne Grethe Dalane, human resources director, Yara International ASA (re-election)
- Knut J. Utvik, deputy director general, Ministry of Trade and Industry (new)
- Sverre Valvik, managing director, Arendals Fossekompani ASA (re-election)
Anne Grethe Dalane was elected chair of the Committee.
None of the Committee's members represents KONGSBERG's management or Board. The majority of the members are considered independent of management and the Board. Sverre Valvik is managing director of Arendals Fossekompani ASA, where Erik Must, a member of KONGSBERG's Board, owns a substantial stake, directly and indirectly. The Nominating Committee is considered to reflect the interests of the body of shareholders as a whole.
Information on the Nominating Committee, a form for nominating candidates for the Board and the deadlines are available on the Group's website at www.kongsberg.com. No nominations to the Board were presented through this channel in 2007.
The work of the Nominating Committee
The Committee held three meetings prior to the 2007 AGM, supplemented by telephone conferences and E-mails. To prepare the Nominating Committee met with Chair of the Board Finn Jebsen and Chief Executive Officer Jan Erik Korssjøen and had telephone contact with KONGSBERG's largest shareholders.
In Q1 2008, a meeting was held with the Chair of the Board to review the Board's evaluation of its own work. Prior to the 2008 AGM, another meeting will be held to discuss the Board's compensation and the nominations for a new Nominating Committee.
None of the Board's members is up for election in 2008.
Departures from the Code of Practice: None.
- The composition of the corporate assembly should be determined with a view to ensuring that it represents a broad cross-section of the company's shareholders.
- The composition of the board of directors should ensure that the board can attend to the common interests of all shareholders and meets the company's need for expertise, capacity and diversity. Attention should be paid to ensuring that the board can function effectively as a collegiate body.
- The composition of the board of directors should ensure that it can operate independently of any special interests. The majority of the shareholder-elected members of the board should be independent of the company's executive management and material business contacts. At least two of the members of the board elected by shareholders should be independent of the company's main shareholder(s).
- The board of directors should not include representatives of the company's executive management. If the board does include members of the executive management, the company should provide an explanation for this and implement consequential adjustments to the organisation of the work of the board, including the use of board committees to help ensure more independent preparation of matters for discussion by the board, cf. Section 9.
- The chairman of the board of directors should be elected by the general meeting so long as the Public Companies Act does not require that the chairman shall be appointed either by the corporate assembly or by the board of directors as a consequence of an agreement that the company shall not have a corporate assembly.
- The term of office for members of the board of directors should not be longer than two years at a time.
- The annual report should provide information to illustrate the expertise and capacity of the members of the board of directors and identify which members are considered to be independent.
- Members of the board of directors should be encouraged to own shares in the company.
Composition of the Board of Directors
The Board of Directors consists of eight members: Finn Jebsen (chair), Benedicte Berg Schilbred (deputy chair), Siri Hatlen, Erik Must, John Giverholt, Roar Marthiniussen, Kai Johansen and Audun Solås. The three latter directors have been elected by and from among the employees. For detailed information on the individual directors, see section "The Board of Directors of Kongsberg Gruppen ASA".
It is essential that the Board as a whole be competent to deal with Board work and the company's main business activities. In addition, the directors are to have the capacity to carry out their duties. According to the Articles of Association, the Group shall have five to eight directors. At present, the Board consists of five external directors and three directors elected by and from among the Group's employees.
The CEO is not a member of the Board.
The directors are elected for two-year terms. The AGM elects the Chair of the Board. This is stated in the instructions to the Nominating Committee. Finn Jebsen was elected Chair of the Board.
Changes in the Board in 2007
All shareholder-elected directors were elected for a new two-year term by the Group's AGM in 2007. Kai Johansen was elected as a new employee representative.
The Board's independence
All shareholder-elected directors are considered autonomous and independent of the Group's management. The same applies in connection with important business associates. Arendals Fossekompani ASA, in which Erik Must directly and indirectly has a substantial stake, owned 7.96 per cent of Kongsberg Gruppen ASA year end (6.85). Ferd AS, where John Giverholt is CFO, owned a 1.6 per cent stake in Kongsberg Gruppen ASA at year end (2.17). The Board is favourable to long-term shareholders being represented. Emphasis is attached to ensuring there are no conflicts of interest between owners, the Board, management and the Group's other stakeholders.
The shareholder-elected directors are three men and two women, so women account for 40 per cent of the Board.
Election of the Board of Directors
The AGM elects the five shareholder-elected representatives to the Board. The Nominating Committee draws up a roster of recommended shareholder nominees in advance of the election. The roster of nominees is sent to the shareholders along with the notification of the AGM. Board elections take place by simple majority. The Norwegian State currently owns some 50 per cent of the shares, and could, in principle, control the election of the Board.
Three directors are elected directly by and from among the Group's employees. Directors are elected for two-year terms and can be re-elected.
The directors' shareholdings
The shareholder-elected directors held the following stakes in the Group at 31 December 2007: Finn Jebsen, Chair of the Board, owner 5 000 shares through his wholly-owned company Fateburet AS. Benedicte Berg Schilbred, deputy chair, owns 17 500 shares through Odd Berg AS. Erik Must owns 31 150 shares personally and 100 000 shares through Must Invest AS.
Departures from the Code of Practice: None.
- The board of directors should produce an annual plan for its work, with particular emphasis on objectives, strategy and implementation.
- The board of directors should issue instructions for its own work as well as for the executive management with particular emphasis on clear internal allocation of responsibilities and duties.
- A deputy chairman should be elected for the purpose of chairing the board in the event that the chairman cannot or should not lead the work of the board. The board of directors should consider appointing board committees in order to help ensure thorough and independent preparation of matters relating to financial reporting and compensation paid to the members of the executive management. Membership of such sub-committees should be restricted to members of the board who are independent of the company's executive management.
- The Board should provide details in the annual report of any board committees appointed.
- The board should evaluate its performance and expertise annually.
Board responsibilities
The Board bears the ultimate responsibility for managing the Group and supervising day-to-day management and corporate operations. This entails that the Board is responsible for establishing control systems and for operating in accordance with the adopted value platform and Code of Ethics, as well as in accordance with the owners' expectations of good corporate governance. The Board of Directors primarily looks after the interests of all the shareholders, but is also responsible for the Group's other stakeholders.
The Board's main tasks are to contribute to corporate competitiveness, and to ensure the Group develops and adds value. Further, the Board shall participate in the shaping of, and adopt the Group's strategy, exercise the requisite control functions and ensure that the Group is well managed and organised. The Board sets the objectives for financial structure and adopts the Group's plans and budgets. Items of major strategic or financial importance for the Group are handled by the Board. The Board hires the CEO, defines his or her work instructions and authority, and sets his or her wages.
Instructions for the Board of Directors
The Board's instructions are extensive and were most recently revised on 12 February 2007. The instructions cover the following points: notification of the Board meetings, notification deadlines, previous instructions, Board meetings, Board decisions, the keeping of minutes, the Board's competency and items for the agenda, the division of responsibilities between the Board and CEO, the relationship between subsidiaries and the parent company, independence and disqualification, the main principles for the work of the Board in the event of a takeover of the company, confidentiality and professional secrecy, compliance with legislation, Articles of Association and instructions.
The Board can decide to deviate from the instructions in certain cases.
Instructions to the CEO
There is a clear division of responsibilities between the Board and executive management. The Chair is responsible for Board work being conducted in an efficient, correct manner and in accordance with the Board's terms of reference. The CEO is responsible for the Group's operational management. The Board has drawn up special instructions for the CEO.
Financial reporting
The Board of Directors receives monthly financial reports on the Group's economic and financial status.
Notice of meetings and discussion of items
?The Board schedules regular board meetings each year. There are usually eight meetings per year. Additional meetings are convened on an ad hoc basis. In 2007, there were 14 Board meetings and one Board seminar. The Board meetings had a 96 per cent attendance rate in 2007.
All directors receive regular information about the Group's operational and financial progress well in advance of the scheduled Board meetings. The directors also receive monthly operations reports. The Group's business plan, strategy and risk are routinely reviewed and evaluated by the Board. Directors are free to consult the Group's executives as needed.
The Board draws up and establishes an annual plan. The CEO usually proposes the agenda for each Board meeting. The final agenda is decided in consultation between the CEO and the Chair of the Board. Besides the directors, Board meetings are attended by the CEO, CFO, Executive Vice President, Corporate Communications, and General Counsel (secretary of the Board). Other participants are summoned as needed.
The Board takes decisions of particular importance to the Group, including the approval of the annual and quarterly accounts, strategies and strategic plans, the approval of significant investments (usually those in excess of MNOK 10), and the approval of sizeable business acquisitions and disposals.
New directors are briefed on the Group's current strategy and historical factors related to its current situation.
Participation in meetings
| Board meetings | Compensation Committee | Audit Committee | |
| Finn Jebsen | 13 | 6 | |
| Benedicte Berg Schilbred | 11 | ||
| Siri Hatlen | 13 | 8 | |
| Erik Must | 13 | 6 | |
| John Giverholt | 12 | 8 | |
| Erik Must | 12 | 6 | |
| Audum Solås | 13 | 8 | |
| Kai Johansen 1) | 8 | ||
| Jan Erik Hagen 2) | 5 |
1) Kai Johansen, member of the Board of Directors from 8 May 2007
2) Jan Erik Hagen, member of the Board of Directors up to and including 2 May 2007
Professional secrecy – communication between the Board and shareholders
The Board's proceedings and minutes are in principle confidential unless the Board decides otherwise or there is obviously no need for such treatment. This is pursuant to the instructions to the Board.
Expertise
An extensive programme has been conducted to give directors insight into the Group's business activities. In early 2007, the Board and corporate management toured the Group's operations in Northeast and Southeast Asia to improve the Board's insight into commercial activities in the area.
Disqualification
The Board is bound by the rules regarding disqualification as they appear in §6-27 of the Public Limited Companies Act. In 2007, there was one case of recusal.
Use of Board Committees
The Group has stipulated the use of a Nominating Committee in the Articles of Association. In addition, the Board set up two subcommittees in 2005: An Audit Committee and a Compensation Committee. Both committees prepare items for consideration by the Board. They are responsible only to the full corporate Board and their authority is limited to making recommendations to the Board.
The terms of reference for all Board committees can be found on the Group's website at www.kongsberg.com.
The Board's Audit Committee
The Audit Committee has responsibilities related to financial reporting, the independent auditor, internal audits and risk management. The Committee consists of two shareholder-elected directors and one employee-elected director. The independent auditor usually attends the meetings. The CEO and the other directors are entitled to attend if they so desire. There were eight meetings in 2007. Members: John Giverholt, Siri Hatlen, Audun Solås.
Compensation Committee
The Committee's responsibilities revolve around the CEO's terms of employment, questions of principle related to wage levels, the bonus system, pension systems/ terms, and employment contracts, etc. for executive management, as well as other matters related to compensation that the Committee believes to be of special importance to the Group. The Committee consists of the Chair of the Board, one shareholder-elected director and one employee-elected director. The CEO is entitled to participate in the Committee's meetings when he so desires, except when his or her own situation is under discussion. Six meetings were held in 2007. Members: Find Jebsen, Erik Must, Roar Martiniussen.
The Board's evaluation of its own work
Each year a special Board seminar is organised on topics related to the Group's activities and to the Board's duties and working methods. The Board's working methods and interaction are discussed on an ongoing basis. In this connection, the Board also evaluates its efforts in terms of corporate governance. Thus far, the Board has not found it expedient to use external consultants to evaluate its work. The evaluation is made available to the Nominating Committee.
Departures from the Code of Practice: None.
- The board of directors must ensure that the company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the company's activities. Internal control and the systems should also encompass the company's corporate values and ethical guidelines.
- The board of directors should carry out an annual review of the company's most important areas of exposure to risk and its internal control arrangements.
- In the annual report, the Board should describe the main elements of the company's internal controls and risk management systems in conjunction with the financial statements.
The Board and internal control
Management draws up monthly performance reports that are sent to and reviewed by the directors. The quarterly financial statements, risk reports and HSE reports are also subject to review at the quarterly Board meetings. See section "Organisation and management" for a more detailed description.
The Board's annual review
The Board of Directors undertakes an annual review of the risk and HSE situation in connection with reviewing the preliminary accounts in early February. The auditor also attends this meeting.
The Board's reporting routines
The Board presents an in-depth review of the company's financial status in the Directors' Report. It also describes the main elements related to HSE and risk. Further, there is a statement about internal control activities under the heading "Organisation and management".
Departures from the Code of Practice: There are currently no separate internal control routines for following up the company's value platform and Code of Ethics. Meanwhile, the Group has set up an Ethics Council to contribute to high ethical awareness, promote good behaviour and ensure a good reputation in and for KONGSBERG.
- The remuneration of the board of directors should reflect the board's responsibility, expertise, time commitment and the complexity of the company's activities.
- The remuneration of the board of directors should not be linked to the company's performance. The company should not grant share options to members of its board.
- Members of the board of directors and/or companies with which they are associated should not take on specific assignments for the company in addition to their appointment as a member of the board. If they do nonetheless take on such assignments this should be disclosed to the full board. The remuneration for such additional duties should by approved by the board.
- The annual report should provide information on all remuneration paid to each members of the board of directors. Where any remuneration beyond the usual director's fee has been paid, this should be specified.
The Annual General Meeting stipulates the Board's remuneration each year. The proposal for remuneration will be made by the chair of the Nominating Committee. In 2007, total remuneration to the Board came to NOK 1 360 002 (NOK 1 208 002 in 2006). For further information about remuneration, see Note 32.
The directors' fees are not linked to performance, option programmes or the like. None of the Board's shareholder-elected directors works for the company in any capacity other than as a director.
Departures from the Code of Practice: None.
- The board of directors is required by law to establish guidelines for the remuneration of the members of the executive management. These guidelines are communicated to the annual general meeting.
- The guidelines for the remuneration of the executive management should set out the main principles applied in determining the salary and other remuneration of the executive management. The guidelines should help to ensure convergence of the financial interests of the executive management and the shareholders.
- Performance-related remuneration of the executive management in the form of share options, bonus programmes or the like should be linked to value creation for shareholders or the company's earnings performance over time. Such arrangements, including share option arrangements, should incentivise performance and be based on quantifiable factors over which the employee in question can have influence.
Guidelines
The Board has drawn up special guidelines for the stipulation of salary and other remuneration to executive management. The CEO's terms of employment are set by the Board. Each year, the Board undertakes a thorough review of salary and other remuneration to the CEO. The review is based on market polls of similar positions.
The structure of the incentive system for the other members of executive management is determined by the Board, and presented to the AGM for information purposes. The terms are proposed by the CEO, and subject to the approval of the Chair of the Board.
The Board's attitude to executive management's salaries is that they should be competitive, but not at the top end of the scale.
The incentive system consists of basic wages, a bonus, pension, and severance scheme and benefits in kind.
Performance-related remuneration
The Board of Directors adopted a new bonus scheme in 2006. Performance-related remuneration is linked to the added value for the shareholders or to the Group's performance trends over time. The prerequisites for the payment of performance-related remuneration are described in Note 32.
Altogether, the Group has 90 managers who are covered by an incentive system that includes an element of individual performance. The criteria for the evaluation cover the financial results of the Group, the business area and the unit, and the achievement of goals related to improvements and a long-term perspective.
Conditions
Remuneration to executive management and the Board is described in Note 32.
Departures from the Code of Practice: None.
- The board of directors should establish guidelines for the company's reporting of financial and other information based on openness and taking into account the requirement for equal treatment of all participants in the securities market.
- The company should publish an overview each year of the dates for major events such as its annual general meeting, publication of interim reports, public presentations, dividend payment date if appropriate etc.
- All information distributed to the company's shareholders should be published on the company's web site at the same time as it is sent to shareholders.
- The Board of Directors should establish guidelines for the Group's contact with shareholders outside the AGM.
The annual report and accounts – interim reporting
The Group normally presents provisional annual accounts in late February. Complete accounts, the Directors' Report and the Annual Report are sent to shareholders and other stakeholders in March/ April. Beyond this, the Group presents its accounts on a quarterly basis. The Group's Financial Calendar is published on the corporate website and in the Annual Report. The Sustainability Report is part of the Annual Report sent to all shareholders. All shareholders are treated equally as a matter of course.
Other market information
Open investor presentations are conducted in connection with the Group's annual and quarterly reports. There, the CEO reviews results and comments on markets and prospects for the future. The Group's CFO also participates in these presentations, as do other members of corporate management from time to time.
The presentations of the annual and quarterly reports are posted on the Group's website at the same time as they are presented. The annual and mid-year results are also made available through webcasts. Beyond that, the Group maintains an ongoing dialogue with and makes presentations for analysts and investors.
It is considered essential to keep owners and investors informed about the Group's progress and economic and financial status. Importance is also attached to ensuring that the same information is released to the entire equity market at the same time. Care is taken to maintain an impartial distribution of information when dealing with shareholders and analysts.
The Group was awarded distinctions for Good Information and Good English by the Oslo Stock Exchange in 2004.
The Board of Directors has drawn up guidelines for the Group's contact with shareholders outside the AGM.
Departures from the Code of Practice: None.
- The board of directors should establish guiding principles for how it will act in the event of a take-over bid.
- During the course of a take-over process, the board of directors and management of both the party making the offer and the target company have an independent responsibility to help ensure that shareholders in the target company are treated equally, and that the target company's business activities are not disrupted unnecessarily. The board of the target company has a particular responsibility to ensure that shareholders are given sufficient information and time to form a view of the offer.
- The board of directors should not seek to hinder or obstruct take-over bids for the company's activities or shares unless there are particular reasons for this.
- Where an offer is made for the Group's shares, the Group's Board should not take advantage of its share issue authorisation or initiate other measures to impede the offer, unless this is approved by the AGM once the offer is made public.
- If an offer is made for a company's shares, the company's board of directors should issue a statement evaluating the offer and making a recommendation as to whether shareholders should or should not accept the offer. If the board finds itself unable to give a recommendation to shareholders on whether or not to accept the offer, it should explain the background for not making such a recommendation. The board's statement on a bid should make it clear whether the views expressed are unanimous, and if this is not the case it should explain the basis on which specific members of the board have excluded themselves from the board's statement. The board should consider whether to arrange a valuation from an independent expert. If any member of the board or executive management, or close associates of such individuals, or anyone who has recently held such a position, is either the bidder or has a particular personal interest in the bid, the board should arrange an independent valuation in any case. This shall also apply if the bidder is a major shareholder. Any such valuation should be either appended to the board's statement, be reproduced in the statement or be referred to in the statement.
- Transactions that are in reality disposals of business activities should be decided by the AGM, except where the law states that such decisions are to be taken by the Corporate Assembly.
There are no defence mechanisms against take-over bids in the Group's Articles of Association, nor have other measures been implemented to limit opportunities to acquire shares in the company. The Norwegian state owns 50.001 per cent of the shares. The negotiability of these shares is subject to parliamentary discretion.
A new section has been added to the Board's instructions, and it refers to the main principles for how the Board should react to any takeover bid. The Board is responsible for ensuring that KONGSBERG's shareholders are treated equally and that operations are not disrupted unnecessarily.
In the event a bid is made for the company, the Board shall make a statement containing a well-grounded evaluation of the bid. The evaluation shall specify how, for example, a takeover would affect long-term value creation at KONGSBERG.
Departures from the Code of Practice: None.
- The auditor should submit the main features of the plan for the audit of the company to the board of directors annually.
- The auditor should participate in meetings of the board of directors that deal with the annual accounts. At these meetings the auditor should review any material changes in the company's accounting principles, comment on any material estimated accounting figures and report all material matters on which there has been disagreement between the auditor and the executive management of the company.
- The auditor should at least once a year present to the board of directors a review of the company's internal control procedures, including identified weaknesses and proposals for improvement.
- The board of directors should hold a meeting with the auditor at least once a year at which neither the chief executive nor any other member of the executive management is present.
- The board of directors should establish guidelines in respect of the use of the auditor by the company's executive management for services other than the audit. The board should receive annual written confirmation from the auditor that the auditor continues to satisfy the requirements for independence. In addition, the auditor should provide the board with a summary of all services in addition to audit work that have been undertaken for the company.
- At the ordinary AGM, the Board should provide information about the auditor's remuneration, broken down into audits and other services.
The auditor's relationship with the Board
The auditor will present an action plan to the Board once a year.
The auditor is always present during the Board's discussions of the financial statements. At that meeting, the Board is briefed on the annual accounts and any other issues of particular concern to the auditor, including any points of contention between the auditor and management. The auditor also participates in the meetings of the Audit Committee.
The Board arranges annual meetings with the auditor to review a report from the auditor that addresses the Group's accounting principles, risk areas and internal control routines.
At least once a year, a meeting will be held between the auditor and the Board without the presence of the CEO or other members of executive management.
The auditor has submitted to the Board a written statement on fulfilment of the Statutory Audit Independence and Objectivity requirement, cf. the Auditing and Auditors Act.
The auditor's relationship to management
The Board has discussed guidelines for the business relationship between the auditor and the Group.
The Group hired Arthur Andersen & Co. as its independent auditor upon its inception in 1987. In April 2002, Arthur Andersen & Co in Norway was merged with Ernst & Young. In addition to ordinary auditing, the company has provided consultancy services related to accounting, tax and due diligence. See Note 12 to the consolidated accounts.
At regular intervals, the Board evaluates whether the auditor exercises a satisfactory level of control.
Departures from the Code of Practice: None.
CEO
The CEO is in charge of the routine management of the business, including responsibility for the Group being organised, run and further developed in compliance with legislation, the Articles of Association and decisions taken by the Board and the AGM.
The Board adopts instructions for the CEO.
Chief Executive Officer Jan Erik Korssjøen retired on 1 March 2008. The new CEO Walter Qvam took over the helm as from the same date.
Executive management
Corporate executive management currently consists of seven individuals. In addition to the CEO, executive management consists of the chief financial officer, the presidents of the two business areas (Kongsberg Maritime and Kongsberg Defence & Aerospace), the executive vice president for Human Resources, the executive vice president for Business Development, and the executive vice president for Corporate Communications.
Corporate executive management usually meets once every fortnight, supplemented by routine contact on an operational basis. The Group subscribes to the paramount principle of making binding commitments to agreed targets. Consequently, it practises a decentralised form of corporate governance that gives individual units considerable freedom of action, accompanied by the responsibility that entails.
Executive management's main responsibility is to manage the corporation, where KONGSBERG's overall situation governs the decisions that are made. Executive management follows up earnings and budgets on a monthly basis with the various performance centres the Group.
Evaluations
Each year executive management evaluates its work and work routines.
Inter-group Boards of Directors
The Group's subsidiaries have their own Boards of Directors, staffed by in-house managers and employees. The president of the holding company or a person so authorised by the president will chair the Boards of the subsidiaries. Appointment of the Boards and board work in subsidiaries shall take place in accordance with the Group's principles for good corporate governance.
Special share register
The company has stipulated in-house guidelines for trading in the company's shares. The rules are in compliance with applicable legislation and regulations for primary insiders and insider trading. These guidelines are updated regularly pursuant to the rules that apply at any given time, and they are distributed to the primary insiders. The in-house guidelines require, among other things, that primary insiders must get internal clearance prior to trading in the company's shares.