Corporate Governance
Odfjell strives to protect and enhance shareholders’ equity through long-term profitable business activities. Sound corporate governance is a central element in our strategy. This chapter describes the legal and operational limitations as to how Odfjell is governed. The Company’s aim is to create sustainable values for shareholders and stakeholders alike. The Company is a SE Company (Societas Europea) subject to Act no. 14 of 1 April 2005 relating to European companies, and listed on the Oslo Stock Exchange and is subject to Norwegian securities legislation and stock exchange regulations.
The framework for corporate governance is The Norwegian Code of Practice for Corporate Governance of 4 December 2007. The code builds on a “comply or explain” principle, which means that possible deviations from the code shall be explained. Odfjell’s shareholder structure, where the founder’s family controls more than 50% of the votes at the general shareholders’ meeting, is such that certain of the code’s provisions are not implemented, in full.
Below we comment on Odfjell’s compliance as to each of the elements of the code, and the reasons for deviations, if any, are explained.
REPORTING ON CORPORATE GOVERNANCE
The Board has decided that The Norwegian Code of Practice for Corporate Governance shall govern the Company’s activities. Odfjell is committed to ethical business practices, honesty, fair dealing and full compliance with all laws
affecting its business. This includes a commitment to high standards of corporate governance throughout the Group. Odfjell has developed its own corporate Code of Conduct, which focuses on ethical behaviour in everyday business activities. All Odfjell employees are obliged to comply with our Code of Conduct.
THE BUSINESS
“The object of the Company is to engage in shipowning and related activities, including the transportation of freight on the Company’s own vessels or chartered vessels, the conclusion of freight contracts, co-ownership agreements and cooperation agreements, as well as taking part in share subscriptions and making partnership contributions, or in any other way establish or participating in other enterprises which may be significant to the development of the Company.” This statement appears in article 1 of Odfjell’s Article of Association. Further articles may be found on our website www.odfjell.com. The Company’s Mission Statement and strategy is discussed on page 3 and 4 of this annual report.
EQUITY AND DIVIDEND
Equity
Odfjell shall maintain an equity base deemed sufficient to support the Company’s objectives and strategy, and shall be sufficient to withstand a prolonged period of adverse conditions in our markets. The target is that the equity shall be between 30 and 35% of total assets. The current equity ratio of 28% is on the low side, as a result of the retroactive tax imposed by the Norwegian Government in 2007. The Board therefore strives to improve the equity ratio.
Dividend policy
Odfjell aims to provide competitive long-term return to its shareholders. The Company emphasises an investor friendly dividend policy based upon financial performance, current capital expenditure programmes and tax positions. The Company strives for semi-annual dividend payments.
Capital increase
The Board has not been assigned authority to issue new shares.
Purchase of treasury shares
The Annual General Meeting on 5 May 2008 authorized the Board of Directors to acquire treasury shares of up to 10% of the Company’s outstanding shares, at a minimum price of NOK 2.50 (par value) and a maximum price of NOK 250 per share. This authorization expires 5 November 2009. A renewal of this authorization for another 18 months will be recommended to the shareholders at the General Meeting in May 2009.
EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES
Class of shares
Odfjell has two classes of shares. The A-shares each carry one vote at the Company’s general meetings.
The B-shares have no voting rights. With the present shareholder structure in place, converting to a single class of shares is not considered appropriate. In all other respects, the two classes of shares have equal rights. The shares are registered with the Norwegian Registry of Securities.
Trading in treasury shares
Treasury shares are acquired in the market and trades are reported to the Oslo Stock Exchange.
Transactions with related parties
Certain transactions are entered into with related parties. Such transactions are carried out as part of the ordinary course of business, and on commercially reasonable
market terms.
Guidelines for directors and corporate management
The Board has established a policy in respect of stock trading. The policy is in line with the Guidelines for Insiders issued by the Oslo Stock Exchange and applies to the Board, the President/CEO and the Senior Management, as well as to other employees who in connection with their work may gain access to price sensitive and non-public information.
FREELY NEGOTIABLE SHARES
The shares are freely negotiable. The Articles of Association place no restrictions on negotiability.
GENERAL MEETINGS
The Board is responsible for calling both annual and extraordinary general meetings. The Annual General Meeting is held in May each year, and 14 days’ written notice is given. A notice is also published on the Oslo Stock Exchange and on the Company’s website at least 21 days ahead of the General Meeting. Shareholders who wish to attend the General Meeting must notify the Company no later than five days before the General Meeting. It is possible to register for the Annual General Meeting by mail and telefax.
The notices shall provide sufficient information on all matters to be considered at the General Meeting, voting instructions and opportunity to vote by proxy. Matters at the General Meeting are restricted to those set forth in the agenda.
Each class A-share carries one vote. All resolutions are adopted by simple majority unless otherwise decided.
Representatives of the Board and the auditor participate in the Annual General Meeting. Management is represented by the Chief Executive Officer and the Chief Financial Officer. The Chairperson of the Board will chair the Annual General Meeting. The minutes of the General Annual Meetings are available on the corporate website.
The financial calendar is published to Oslo Stock Exchange, on www.odfjell.com and in the annual report.
The following matters shall be the business of the Annual General Meeting:
• adoption of the annual accounts and balance sheet.
• application of the year’s profit or coverage of the year’s loss in accordance with the adopted balance sheet,
and the declaration of dividend.
• adoption of the remuneration of the Board of Directors
• statement on salary and other benefits to the Management.
Issues which shareholders want to be considered at a general meeting, must be submitted in writing to the Board of Directors in time to be included in the notice of the General Meeting. Extraordinary general meetings may be called in accordance with the provision of the Limited Liability Companies Act.
NOMINATION COMMITTEE
Odfjell SE has not established a Nomination Committee. The Board has evaluated the possibility of establishing a Nomination Committee, but has concluded such a committee would hardly bring about added quality or value.
CORPORATE ASSEMBLY AND BOARD OF DIRECTORS, COMPOSITION AND INDEPENDENCE
The Company has no Corporate Assembly. The Annual General Meeting elects the Board. The interests of the employees are being met by an agreement between the employees and Odfjell for the involvement of employees. The employees have established a permanent Employee Representatives Body (ERB) in order to attend to the employees’ rights and obligations with Odfjell. The ERB consists of up to six representatives, partly from our tank terminal in Rotterdam, the head office in Bergen and the officers’ council.
The scope of information and consulting procedures shall be on transnational issues, which concerns the group of employees either in the Company or in one or more of the subsidiaries.
Additionally, employee involvement is secured by various committees and councils on corporate level and in respective subsidiaries abroad, where management and representatives from the employees, both onshore and seafarers, meet to discuss relevant issues. According to the Articles of Association the Company shall have a Board composed of a minimum of five and a maximum of seven members. The members are elected by the shareholders at the Annual General Meeting.
In an Extraordinary General Meeting held on 2 December 2008, the shareholders changed the composition of Directors: Katrine Trovik was replaced by Irene Waage Basili, and Peter G. Livanos was replaced by Ilias A. Iliopoulos. The members of the Board are elected for two years at a time.
Bernt Daniel Odfjell is the Chairman of the Board. The Chairman has been delegated additional tasks by the Board, and consequently acts as Executive Chairman. Bernt Daniel Odfjell represents the Odfjell family, the largest shareholder of Odfjell SE. Board member Ilias A. Iliopoulos represents Chemlog Holdings Ltd., the second largest shareholder. Reidar Lien, Marianna Moschou and Irene Waage Basili are independent Board members. Great caution is taken to avoid any conflict of interest in issues with related parties. In this connection the independent Board members represent valuable external viewpoints.
THE WORK OF THE BOARD
Ultimately the Board is responsible for the Company’s objectives, and the means of achieving them. Thus, the Board of Directors determines the strategic direction of the Company and decides on matters, which in relation to the Company’s overall activities are of significant nature. Such matters include confirmation of the strategic guidelines, approval of the budgets as well as decisions on major investments and divestments. Furthermore, the Board ensures a correct capital structure and defines the shareholder policy, including the dividend policy. The Board also appoints and determines the remuneration of the President/CEO.
It is the responsibility of the Board to ensure that the Company’s management and employees operate in a safe, legal and ethically responsible manner. To emphasise the importance of these issues, an Odfjell Code of Conduct document has been communicated throughout the organisation. The Code focuses on aspects of ethical behaviour in everyday business activities. All issues are dealt with in plenary meetings.
The Board has discussed the need for a specific Audit Committee, but has decided that since the Board is relatively small it is preferable that all Board members participate in discussions regarding auditing and internal control. An Audit Committee is not mandatory under Norwegian legislation.
The Board held seven regular meetings in 2008. Apart from ongoing business, four of the meetings dealt with the quarterly financial reports, one covered strategic matters and one meeting reviewed and approved next year’s budget. The auditor participated in the meeting of the Board of Directors that dealt with the annual accounts. One meeting is always held in May, in connection with the Annual General Meeting. The Annual General Meeting represents an occasion for the Board to meet and discuss with shareholders face-to-face and to decide on important issues such as the appointment of the auditors, dividend payments, and the election or re-election of Board members.
In addition to the regular Board meetings, the Board may also hold special meetings, either by telephone conference or by written resolution at the request of the Executive Chairman, the President/CEO or by any two Board members.
The Board has not made any formal evaluation of its work.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board of Odfjell is kept updated on management and Company activities through reporting systems, including monthly financial statements. HSE is a fixed item on the Board’s agenda. The Company is also subject to external control functions such as by the auditors, the ship classification societies, port and flag state control, and other regulatory bodies like IMO, ISM Codes, etc.
The Compliance Officer of Odfjell monitors that the Company acts in accordance with applicable law and regulations. Particular focus has been applied to competition law compliance, and regular updates are given to all relevant personnel.
REMUNERATION OF THE BOARD OF DIRECTORS AND OF THE SENIOR MANAGEMENT
The Annual General Meeting on 5 May 2008 resolved that the annual compensation to the members of the Board be NOK 1 290 000 for the Executive Chairman and NOK 200 000 for other members of the Board. The compensation was paid in cash. President/ CEO Terje Storeng received compensation and benefits of totally NOK 4 933 000 in 2008. Neither the Board members, the President/CEO nor the Management have stock options.
More information about the compensation and benefits to the Board, the President/CEO and Senior Management may be found in note 3 of Odfjell SE’s financial statements.
INFOMATION AND COMMUNICATION
Odfjell presents preliminary annual accounts early February. The complete accounts, the Directors’ Report and the Annual Report are sent to shareholders and other stakeholders late March. Odfjell presents its accounts on a quarterly basis. The Financial Calendar is published on the Oslo Stock Exchange, on the corporate website and in the Annual Report. All shareholders are treated equally with regards to information.
Open investor presentations are conducted at least two times per year in connection with Odfjell’s quarterly reports. The CEO reviews results and comments on markets and prospects. Odfjell’s CFO also participates in these presentations. The presentations of the annual and quarterly reports are published at the Oslo Stock Exchange and posted on the corporate website at the same time as they are presented. The annual and mid-year results are presented in a live presentation in Oslo or Bergen, whereas reports from first and third quarters are made available through webcasts. Odfjell also maintains an ongoing dialog with, and make presentations, to analysts and investors. Care is taken to maintain an impartial distribution of information when dealing with shareholders and analysts.
TAKE- OVERS
There are no defence mechanisms against take-over bids in Odfjell’s Articles of Association, nor have other measures been implemented to limit opportunities to acquire shares in the Company.
AUDITOR
The auditor prepares an annual plan for the audit. The auditor is present during the Board’s discussion of the annual financial statements. At the 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 Board has a special session with the auditor without the presence of the Management. The auditor submits to the Board a written statement on fulfilment of the Statutory Audit Independence and Objectivity requirement in accordance with the Auditing and Auditors Act.
In order to secure consistency in control and audits in the Group, Odfjell generally uses the same audit firm for all subsidiaries worldwide, and has hired Ernst & Young as the Company’s independent auditor.