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representing this majority shall be independent of significant shareholders of the company.

The duties of the board consist of supervision and control of the operative management of the company. This task requires that the majority of directors should have no interdependent relation- ship to the company. Although it is recommended that directors hold shares in the company, the majority consisting of independ- ent directors should include at least two directors independent of significant shareholders of the company. Such composition of the board supports the objective that the board should act in the interests of the company and all of its shareholders.

Recommendation 18 Evaluation of independence

The board shall evaluate the independence of the directors and report which directors it determines to be independent.

A director is not independent of the company if

  • a)

    the director has an employment relationship with, or holds a position in, the company;

  • b)

    the director has had an employment relationship with, or held a position in, the company during the last three years prior to the inception of the board membership;

  • c)

    the director receives from the company or from a member of its operative management not insignificant compensation for services or other advice not connected with the duties of the board,

    • e.

      g. if the director works on consulting assignments for the company;

  • d)

    the director belongs to the operative management of another company, and the two companies have a customer, supplier or cooperation relationship significant to the other company; or

  • e)

    the director belongs to the operative management of another company whose director is a member of the operative management in the first company (interlocking control relationship).

In addition, the board can on the basis of its overall evaluation determine that a director is not independent of the company if

  • f)

    the director participates in a performance-based or share-related compensation system of the company. The financial significance of the compensation system shall be taken into account; or

  • g)

    the company is aware of other factors that may compromise the independence of the director and the directors ability to impartially represent all shareholders.

A director is not independent of a significant share- holder of the company if h) the director exercises dominant influence such as

referred to in Chapter 1, Section 3 of the Companies Act1), in the company, or has a relationship such as

8

referred to in sub-sections a) – b) above to a party who exercises dominant influence in the company; or

  • i)

    the director is a significant shareholder of, or has a relationship such as referred to in sub-sections

    • a)

      – b) above to, a significant shareholder of the company. Significant shareholder means a share- holder who holds at least 10 % of all the shares or of the aggregate votes in the company.

In all situations, when evaluating independence, also the circumstances of private individuals or legal enti- ties closely affiliated to the member, such as referred to in Chapter 1, Section 4 of the Companies Act2), shall be taken into consideration. Companies belonging to the same group with the company are comparable to the company.

There is no internationally prescribed form for the independence criteria. The above-mentioned criteria are divided into three categories. In the first category, the existence of even one of the circumstances cited in sub-sections a) – e) above means that the director cannot be determined to be independent of the company. Sub-sections f) – g) deal with issues on the basis of which the board may after the evaluation determine that the director is not independent. Sub-sections h) – i) present the criteria on the basis of which board members are determined not to be independent of significant shareholders of the company.

Recommendation 19 Biographical details and holdings of directors

The company shall report the following information on directors:

  • name

  • year of birth

  • education

  • main occupation

  • primary working experience

  • date of inception of the board membership began

  • other simultaneous key positions of trust

  • shareholdings in the company

  • holdings and rights based on a share-related

compensation system of the company

The information on the board members and their holdings permits the shareholders to evaluate the operating capabilities of board members and their relationships to the company.

Recommendation 20 Obligation to provide information to directors

Each director shall provide the board with sufficient information that will allow the board to evaluate his/her qualifications and independence, and shall notify the board of any changes in such information.

The independence evaluation referred to in recommendation 18 requires that the company receive the necessary information from the directors. Each director must also supply the biograph-

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