Capital and share structure
FLSmidth & Co. A/S is listed on NASDAQ OMX Nordic Exchange Copenhagen. No special rights are attached to any share and there are no restrictions on the transferability of the shares. At the end of 2010, FLSmidth had about 44,600 shareholders, and two shareholders, ATP and UBS, had reported a shareholding in excess of 5%. See page 58 for further details on shareholders and the company’s dialogue with the stock market.
Division of responsibility between Board of Directors and Executive Management
According to general practice in Denmark, FLSmidth & Co. A/S maintains clear division of responsibility and separation between Board of Directors and Executive Management. Tasks and responsibilities are defined at an overall level via rules of procedure for the Board of Directors and rules of procedure for the Executive Management. There is no other specific description of the duties and tasks of the Board of Directors.
The Executive Management is responsible for the day-to-day management of the Company, and the Board of Directors oversees the Executive Management and handles overall managerial issues of a strategic nature. The Chairman is the Board of Directors’ primary liaison with the Executive Management.
The Board of Directors
Composition of the Board of Directors
The Board of Directors is elected at the General Meeting apart from those Board members who are elected pursuant to the provisions of the Danish Companies Act on representation of employees. Board members elected at the General Meeting constitute not less than five and not more than eight members, currently six members in order to maintain a small, yet competent Board.
The members of the Board elected at the General Meeting retire at each Annual General Meeting. Re-election may take place. Pursuant to Danish legislation, the Group’s employees are represented on the Board of Directors by currently three members who are elected for four years at a time.
Immediately after the Annual General Meeting, the Board of Directors elects from its own number a Chairman and a Vice Chairman. In general, between six and eight ordinary Board meetings are held every year and extraordinary Board meetings are held when needed.
To achieve a highly informed debate with the Executive Management, the Board membership profile reflects substantial managerial experience from internationally operating industrial companies. At least one member of the Board must have CFO experience from a major listed company, and all other members must have CEO experience from a major internationally operating and preferably listed company.
The Board of Directors is composed so that all members elected at the General Meeting bring with them competencies in acquisition and disposal of enterprises, financing and stock markets, international contracts, accounting and preferably experience in civil contracting and technical expertise on the cement and/or minerals industries.
All Board members elected at the General Meeting are considered independent apart from Jens Stephensen who was a member of the Board from 1995 to 2000 and again since 2002.
Pursuant to the rules of procedure of the Board of Directors, a Board member must retire at the first Annual General Meeting held after the member has passed the age of 70. This means that Mr Jørgen Worning, who is chairman of the Board of Directors, will not stand for reelection at the coming Annual General Meeting to be held on 29 April 2011.
After the General Meeting, the Board expects to elect Vagn Ove Sørensen as new Chairman and Jens S. Stephensen to continue as Deputy Chairman provided the present Board, except Jørgen Worning, is reelected.
Board committees
Since 2002 the Board of Directors has in practical terms structured its work around the following committees and responsibilities. Information on the terms of reference of the Board committees appears here.
Chairmanship and nomination committee
The nomination committee consists of the chairman and the vice chairman of the Board of Directors. The nomination committee is elected each year by the entire Board at the initial Board meeting following the Annual General Meeting. The responsibilities of the nomination committee are to continuously evaluate the work and composition of the Board and initiate any changes and suggest candidates for new Board members, cf. the membership profile outlined in the section describing the composition of the Board. In carrying out these duties, the nomination committee has chosen to involve the remuneration committee.
Remuneration committee
The remuneration committee normally consists of three Board members who meet four to six times a year. The remuneration committee is responsible for negotiations of pay and remuneration of the Executive Management and managers reporting directly to the Executive Management. On behalf of the entire Board, the committee also handles appointments within the latter category. The committee currently consists of the chairmanship plus Torkil Bentzen and Vagn Ove Sørensen.
Audit committee
Due to the fact that the number of Board members elected at the General Meeting is limited to six, it has been decided that the whole Board shall serve as audit committee. The audit committee is responsible for monitoring the financial reporting process in the company and the effectiveness of its internal control systems. Besides, the audit committee monitors the statutory audit of the financial statements and the independence of the auditor. The audit committee carries out its business like any other Board activity. The audit committee continuously evaluates the level of internal controls in the Group and how this is monitored in cooperation with day-to-day management. No independent internal audit function has been established as this is mainly undertaken by the controllers of the parent company and of the subsidiaries.
Board of Directors remuneration and shareholdings
The members of the Board of Directors receive a fixed fee in cash which is approved by the Annual General Meeting. The Board of Directors does not receive incentive pay and has not done so since 2002. Information concerning the total remuneration of the Board of Directors appears from the consolidated financial statements note 36. The Board members’ individual investments in FLSmidth & Co. A/S shares appear from the table in note 37. The Board members’ individual investments in FLSmidth & Co. A/S shares appear here.
The Executive Management
Composition of the Executive Management
The Executive Management currently consists of four members who hold overall responsibility for the day-to-day operations of the Group. Mr Jørgen Huno Rasmusssen, CEO with overall responsibility for the Group’s cement activities, and Mr Poul Erik Tofte, CFO, are both based at the Danish headquarters in Valby. Mr Christian Jepsen holds overall responsibility for the Group’s minerals activities. Mr Bjarne Moltke Hansen, whose overall responsibilities include Customer Services, Cembrit and the Cement product companies, is also responsible for the Group’s cement activities in India.
The Executive Management consists of experienced business executives who each bring with them insight and hands-on experience that match the challenges and practical issues currently facing the Group.
Remuneration of the Executive Management
The Board of Directors has set up a remuneration committee which continuously assesses the Executive Management’s compensation. In the opinion of the Board, a combination of fixed and performance-based pay to the Executive Management helps to ensure that the Group can attract and retain key persons whilst partially incentive-based pay further encourages the Management to create value to the benefit of shareholders. The complete guidelines for the incentive programme are accessible on the company website www.flsmidth.com/IncentivePay. Exhaustive information about incentive pay to the Executive Management pursuant to the Financial Statements Act also appears from Notes 9 and 36 to the consolidated financial statements. At 31 December 2010, the Executive Management held a total of 128,050 share options in FLSmidth & Co. A/S and their total investments in FLSmidth & Co. A/S amounted to 40,210 shares.
Presentation of financial statements and internal control
To ensure a high quality of the Group’s financial reporting systems, the Board and Management have adopted policies, procedures adhere to, including:
• Continuous monitoring of goals and results achieved viewed against approved budgets
• Continuous monitoring of projects including handling of risks and accounting for them
• Policies for use of IT, insurance, cash management, procurement, etc.
• Reporting instructions and manual
• Finance manual
• Closing procedure manual
Responsibility for maintaining sufficient and effective internal controls and risk management in connection with financial reporting lies with the Executive Management.
The audit committee consists of all members of the Board and continuously monitors the process of financial reporting and the adequacy and effectiveness of the internal control systems established, including new accounting standards, accounting policies and accounting estimates. Besides, the Board of Directors monitors and checks the independence of the external auditor and monitors the planning, execution and conclusions of the external audit.
General Meeting
The general meeting is the company’s highest authority, and detailed information about holding, convening and attending of general meetings appears from the Articles of Association of the company.
Code of conduct
In the autumn of 2008, the Board of Directors adopted a Code employees are to act and respond in various business contexts and which is mostly a codification of the practices already adopted by the company. In the years since then, a series of training sessions have been held for the staff to ensure that all employees in the Group are acquainted and comply with the code of conduct. The Code of Business Conduct is also incorporated in the employment contracts signed with new employees. It is planned in future to introduce a web-based training programme to ensure that all the Group’s employees are kept up-to-date regarding the Group’s Code of Business Conduct.
Recommendations for corporate governance
Pursuant to Section 4.3 of the rules for issuers of shares listed on NASDAQ OMX Nordic Exchange Copenhagen, Danish companies must explain in their annual report how they will address the recommendations of NASDAQ OMX Nordic Exchange Copenhagen for corporate governance based on the ‘comply or explain’ principle. The recommendations were revised in 2010, and in the Board’s opinion FLSmidth essentially complies with the recommendations, however, currently with the following exceptions:
• The Board has not adopted a structured process of self-evaluation as the nomination committee handles this task on an ad-hoc basis.
• Since the entire Board serves as audit committee, the Chairman of the Board also chairs the audit committee.
• Management remuneration agreements on variable pay do not establish a right for the company to claim full or partial repayment.
• No information is given about the individual remuneration of Board or Management members, as the Board of Directors does not consider this relevant.
This statement of corporate governance pursuant to the Danish Financial Statements Act Section 107b is part of the Management’s Review in the 2010 Annual Report.
Corporate governance statement - updated End September 2011
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