Introduction
Corporate Governance in L E Lundbergföretagen AB is based on, inter alia, the Articles of Association, the Swedish Companies Act, the Rules and regulations for issuers as published by NASDAQ OMX Stockholm (the Exchange), the Swedish Code of Corporate Governance (the Code) and other applicable laws and regulations. The Code is a form of self-regulation within Swedish industry based on the “comply or explain” principle, whereby companies that apply the Code may deviate from individual rules but, in such cases, must explain the reason for each deviation and describe the solution selected. This Corporate Governance Report was prepared by the Board of L E Lundbergföretagen AB in accordance with the Code’s rules.
Division of responsibilities
Responsibility for the management and control of L E Lundbergföretagen AB is divided among the shareholders at the Annual General Meeting, the Board of Directors and the President, in accordance with the Swedish Companies Act, other laws and regulations, pertinent rules for stock market companies, the Articles of Association and the Board’s internal control instruments.
Shareholders
In February 2011, the Company had 15,617 shareholders. The ten largest owners had total holdings corresponding to 75.6% of the share capital. Foreign investors owned about 6.8% of the share capital. For additional ownership information, see Ownership Structure .
Annual General Meeting
The Annual General Meeting is the highest decision-making body in L E Lundbergföretagen AB. The Annual General Meeting, which is held within six months of the close of the fiscal year, adopts the income statement and balance sheet, makes a resolution regarding dividends, elects members of the Board and approves their fees, and, when applicable, elects auditors and approves their fees, and deals with other statutory matters and makes resolutions on guidelines for remuneration of senior executives and on other motions submitted by the Board of Directors and shareholders.
All shareholders who are listed in the share register on a given record day, and who have notified the Company of their intention to participate in the meeting within the allotted time period, are entitled to participate in the meeting and exercise voting rights equal to the total number of shares they hold. Shareholders may participate via proxy. To be able to exercise their voting rights at the Annual General Meeting, shareholders whose shares are trustee-registered must temporarily re-register their shares in their own name in accordance with the terms in the notification of the Annual General Meeting.
The 2010 Annual General Meeting was held on April 13, 2010. The annual accounts and auditors’ report, as well as the consolidated financial statements and auditors’ report on the consolidated financial statements, were presented at the meeting. In conjunction with this, the Board Chairman presented information concerning the Board’s duties and information concerning cooperation with the auditors. In addition, President and CEO Fredrik Lundberg provided a presentation of Group operations during 2009.
The auditors presented a report on their audit to the Annual General Meeting through the submitted auditors’ report and a verbal account of their work during the past year. The Annual General Meeting also resolved on guidelines for the remuneration of senior executives in accordance with what is stated on page 49 of the Annual Report, in addition to authorizing the Board to decide on acquisition of treasury shares. The notification procedure for Annual General Meeting’s has been simplified for future Annual General Meeting’s in respect of the manner and time limit for notification in accordance with the change in the Articles of Association adopted at the 2009 Annual General Meeting. The change was made conditional on a change to the Swedish Companies Act, which took effect on January 1, 2011.
The new Articles of Association were registered with the Swedish Companies Registration Office on December 28, 2010. The changes mean, that in the future, official notification of the Annual General Meeting will take the form of an announcement in Post- och Inrikes tidningar and on the Company’s website. At the time of the official notification, information that notification has been sent is to be provided in an advertisement in Dagens Nyheter. Notification of the Annual General Meeting and extraordinary general meetings that will not deal with changes in the Articles of Association must be carried out at the earliest six weeks and at the latest four weeks prior to the meeting. Notification of other extraordinary general meetings must be carried out at the earliest six weeks and at the latest three weeks prior to the meeting.
Nomination Committee
In view of the composition of shareholders, it has not been deemed necessary to appoint a Nomination Committee. Therefore, motions for the election of a Chairperson for the Annual General Meeting, elections of Board members and, when appropriate, of the auditors, as well as motions concerning the remuneration to be paid to Board members and the auditors are submitted by the Company’s major shareholders and presented in the notification of the Annual General Meeting and on the Company’s website. The Company, accordingly, does not comply with rules of the Code concerning nomination committees.
Board of Directors and its work
Composition of the Board
In accordance with the Articles of Association, the Board of Directors shall consist of not less than five and not more than ten members, and a maximum of three deputy members elected by the Annual General Meeting for the period extending to the next Annual General Meeting. L E Lundbergföretagen AB’s Board of Directors, which was elected by the 2010 Annual General Meeting, consists today of nine members, including the President.
Mats Guldbrand, Chairman of the Board, was formerly Equity Manager at AMF Pension, among other positions. Carl Bennet is Chairman of the Board of such companies as Getinge and Elanders. Gunilla Berg was formerly executive vice president and CFO of the SAS Group and worked previously as executive vice president and CFO of Kooperativa Förbundet, among other positions. Lennart Bylock has served as President, Chairman and Board member of a large number of companies, including several stock market companies. Louise Lindh is Deputy President of Fastighets AB L E Lundberg. Fredrik Lundberg is President and CEO of L E Lundbergföretagen AB. Katarina Martinson is a Member of the Board of AB Lorentzen & Wettre and has previously worked in positions involving investment strategy and macroeconomics. Sten Peterson is President of Byggnads AB Karlsson & Wingesjö. Christer Zetterberg has served as President and CEO of Holmens Bruk, PK-banken and AB Volvo, among other companies. A description of the assignments currently held by Board members, see Board of Directors .
All of the Members of the Board, with the exception of Fredrik Lundberg in his capacity as President and CEO of L E Lundbergföretagen AB, Louise Lindh in her capacity as Deputy President of the wholly owned subsidiary Fastighets AB L E Lundberg and Sten Peterson in his capacity as President of Byggnads AB Karlsson & Wingesjö, in which Fredrik Lundberg is Chairman of the Board and majority shareholder, are regarded as being independent in relation to the Company. In addition, all of the Board members, apart from Fredrik Lundberg and Sten Petersson, are regarded as being independent in relation to the Company’s major shareholders. Accordingly, the Board complies with the requirements concerning independence that are imposed in the Code. However, the composition of the Board does deviate from the Code in respect of provision 4.3 in that two of the Board members are senior executives of the Company and the Company’s subsidiary, respectively. This deviation is motivated on the grounds that it is suitable that the composition of the Board of Directors reflects shareholdings in the Company.
Chairman
At the 2010 Annual General Meeting, Mats Guldbrand was elected Chairman of the Board. The Chairman organizes and directs the Board’s efforts to ensure the work is conducted effectively and in compliance with the Swedish Companies Act, other laws and regulations, pertinent rules for stock market companies (including the Code) and the Board’s internal control instruments. The Chairman monitors the operations in a dialog with the President and is responsible for ensuring that other Board members receive satisfactory information and appropriate decision-making documentation. The Chairman is responsible for keeping Board members up to date and broadening their knowledge of the Company and otherwise providing whatever training might be required to effectively conduct their Board work. The Chairman is also responsible for annual evaluations of the Board’s work.
Board of Directors’ work
The Board of Directors establishes written working procedures every year that regulate the Board’s work agenda and its internal distribution of duties, decision-making priorities within the Board, the Board’s meeting procedures and the Chairman’s responsibilities. In addition, the Board has issued a finance policy, information policy and written instructions regarding the allocation of responsibilities between the Board and the President.
The Board monitors the President’s work through continuous efforts to follow up operations during the year, assumes responsibility to ensure that the organization, management and guidelines for administration of the Company’s business are suitably designed and that satisfactory internal controls are in place. The Board is also responsible for development and ensuring compliance with the Company’s strategies through plans and goals, decisions regarding acquisitions and divestments of business operations, major investments and remuneration of the President, in accordance with the guidelines for remuneration of senior executives that were resolved by the Annual General Meeting.
In accordance with the applicable working procedures, the Board meets at least four times per year and holds one statutory meeting per year. Whenever required, extraordinary meetings are held to address special items. Seven meetings of the Board were held during 2010. The Board focused special attention on strategic and financial issues, issues relating to the economy, investment issues and accounting issues during the year. Furthermore, at every Board meeting, presentations were made regarding the business development of Fastighets AB L E Lundberg and L E Lundberg Kapitalförvaltning AB and in portfolio companies.
Attendance at Board meetings during the year was extremely high. All Board members were present at all Board meetings with the exception of Lennart Bylock who was unable to attend one meeting and Katarina Martinson who was unable to attend two meetings.
The Group’s CFO participates in Board meetings, as does the Board’s secretary, who is an independent lawyer. Other senior executives of the Company also participate in Board meetings to present special issues or whenever deemed appropriate.
Remuneration of the Board
Fees paid to the elected members of the Board are established by the Annual General Meeting based on motions submitted by the Company’s largest shareholders. At the 2010 Annual General Meeting, it was resolved that fees to the Board for the period extending from the 2010 Annual General Meeting to the 2011 Annual General Meeting would total SEK 2,000,000, of which SEK 600,000 to the Chairman of the Board. Each of the other Board members elected by the Annual General Meeting, with the exception of the President, will receive a fee of SEK 200,000. Any further remuneration paid to any Member of the Board, including the President, is explained in the consolidated financial statements, Note 5.
Audit Committee
The Board has considered the matter of whether to establish an Audit Committee and decided not to. Instead, the Board of Directors fulfills the responsibilities otherwise assigned by the Code to an audit committee. This structure functions satisfactorily considering the Company’s relatively small Board of Directors and provides the entire Board with full insight into and opportunities to assume an active role in these important issues. During 2010, accordingly, the Board monitored the system for internal control of the financial reporting. This supervision is intended to ensure the efficiency of the operations, their compliance with laws and regulations and the accuracy of the financial reporting. The Board has reviewed and evaluated the procedures for financial accounting and reporting and followed up with evaluations of the work performed by the external auditors, their qualifications and independence. The Board also provides Group management with identification and evaluations of the primary risks in the operations and ensures that management focuses on efforts to address these risks. During 2010, the Board conducted two reviews with, and received reports from, the Company’s external auditors, once without the attendance of President or other members of company management. The reports by the auditors did not necessitate any special actions by the Board.
Remuneration Committee
Matters pertaining to remuneration and other terms of employment for the President and CEO are prepared by two Board members, currently the Chairman of the Board and Lennart Bylock. Decisions pertaining to such matters are made by the Board of Directors without the participation of the President. Remuneration and other terms of employment for other executives are negotiated and agreed upon with the President and CEO. Additionally, the Board of Directors monitors and evaluates all programs for variable remuneration of senior executives. The Board follows and evaluates compliance with those guidelines for remuneration of senior executives adopted by the Annual General Meeting and applicable remuneration systems and remuneration levels in the Company. The Board of Directors has considered the matter of whether to establish a remuneration committee but has concluded that the means of preparation and the division of competencies that are applied in respect of remuneration are appropriate and sound. Accordingly, the Board has not found any reason to change its position on the matter, even if this constitutes a deviation from the Code’s rules.
Corporate management
The President manages and ensures that business operations are conducted in compliance with the Swedish Companies Act, other laws and regulations, pertinent rules for stock market companies, the Articles of Association and the Board’s internal control instruments, and in accordance with the objectives and strategies established by the Board. In consultation with the Chairman of the Board, the President prepares required information and decision-making documentation prior to Board meetings, presents the issues and provides justification for motions.
President and CEO Fredrik Lundberg, born 1951, has degrees in engineering and business administration and is a Doctor of Economics and a Doctor of Engineering. Fredrik Lundberg is the Chairman of Cardo, Holmen and Hufvudstaden, Deputy Chairman of Handelsbanken and a Board member of Industrivärden and Sandvik. Through direct ownership and companies, Fredrik Lundberg held 24,000,000 Series A shares and 9,230,000 Series B shares in the Company, or a total of 33,230,000 shares, at December 31, 2010. For a more detailed presentation of the President and other senior executives, see
Senior Executives .
Remuneration of the President and other senior executives
The 2010 Annual General Meeting resolved on unchanged guidelines for the remuneration of senior executives, with the exception of a minor clarification regarding the formulation of any bonus, which was a consequence of the Company’s adaptation of the new Code.
The guidelines are described in greater detail on page 49 of the Annual Report. The Company has no outstanding share-based or share-price-related incentive programs.
Active Ownership
L E Lundbergbergföretagen AB is an active owner of its portfolio companies. The Company is represented in each of these companies through one or more of the positions President, Executive Vice President or Board member in LE Lundbergföretagen AB. Active ownership is also exercised through representation on the Nomination Committees of the portfolio companies.
Internal audit
The Company has a simple legal and operating structure and a carefully formulated control and internal audit system. The Board monitors the Company’s evaluations of its internal control through contacts with the Company’s auditors and other means. In view of the information presented above, the Board has decided not to establish a special internal audit function.
Auditors
According to the Articles of Association, the Company must have two auditors with or without deputies, or alternatively a registered public accounting firm. At the 2007 Annual General Meeting, Authorized Public Accountant Kjell Bidenäs was re-elected auditor of the Company and Authorized Public Accountant George Pettersson was newly elected auditor of the Company together with authorized public accountants Carl Lindgren and Hans Åkervall as deputy auditors, all from KPMG, for a term of office of four years. Accordingly the current mandate period terminates at the 2011 Annual General Meeting. Other major assignments performed by Kjell Bidenäs include being auditor for OEM International AB and Returpack Svenska AB. Other major assignments performed by George Pettersson include being auditor for Skanska, B&B Tools, Holmen, Hufvudstaden and MTG.
The audit is reported to the shareholders in the form of an audit report that constitutes a recommendation to the shareholders ahead of items of business at the Annual General Meeting concerning adoption of the income statement and the balance sheet for the Parent Company and the Group, the disposition to be made of the profit in the Parent Company and discharging the members of the Board of Directors and the President from liability for their administration during the preceding fiscal year.
Their duties include checking compliance with the Articles of Association, the Swedish Companies Act and the Annual Accounts Act, and with International Financial Reporting Standards (IFRS), matters involving valuation of balance sheet items and follow-ups of significant accounting processes and of the management of the Company and financial control.
In addition to the audit assignment, Lundbergs has also consulted KPMG in matters related to the consolidated accounts. The amounts of remuneration paid to KPMG for audit services over the past two years are presented on page 50 of the Annual Report. In its capacity as auditors for L E Lundbergföretagen AB and its subsidiaries, KPMG is obliged to verify its independence before deciding to conduct other assignments.
Articles of Association
The Articles of Association include established directives concerning the Company’s business operations, the number of Board members and auditors, instructions for announcements to attend the Annual General Meeting, business for discussion at the Annual General Meeting and where the Annual General Meeting should be held. For more information about the current Articles of Association including the changes described above under Annual General Meeting and which were adopted at the 2009 AGM, see Corporate Governance/Articles of Association.
Information
Lundbergs’ information to shareholders and other interested parties is provided via the Annual Report, year-end and interim reports, press releases and the Company's website. The website also includes financial reports and press releases for the past year, as well as information concerning corporate governance. Information released by the Company complies with an information policy established by the Board of Directors.
Internal control and risk management concerning the financial reporting for the 2010 fiscal year
The Swedish Annual Accounts Act stipulates that the Board annually submits a description of the principal elements of the Company’s system for internal control and risk management with regard to financial reporting.
Control environment
The control environment forms the foundation for the internal control of the financial reporting. The Company’s internal control structure is based on a distinct division of responsibilities and work between the Board of Directors and the President and within business operations. Policies and guidelines are documented and evaluated continuously by management and the Board of Directors. These control documents, and carefully prepared process descriptions are communicated via established information and communication paths and are thus made available and known to the employees concerned.
Risk assessment
The Company identifies, analyzes and takes decisions on the handling of the risk that errors could arise in financial reporting. The Board addresses the outcome of the Company’s risk-assessment and risk-management processes, in order to ensure that they cover all significant areas and, wherever required, identifies necessary actions.
The Company’s largest operational risks are related to property valuation and financial transactions (primarily with respect to holdings of publicly traded shares).
Control measures
Based on the completed risk assessment, the Company has established a number of control measures. These measures are of a preventive nature, meaning that they are designed to avoid losses or errors in financial reporting, and of an investigative nature. Another aim of the controls is to ensure that errors are corrected. Examples of processes with carefully prepared control measures are new builds, refurbishment, maintenance and leasing activities within real estate management and securities handling within equity management.
Information and communications
At an overall level, internal information and external communication activities are governed by, for example, an information policy. Internal communications to and from the Board of Directors and management occur through, for example, regular information meetings arranged by management. Another important communications channel is the Company’s intranet, through which all employees have access to up-to-date information.
Internal policies, guidelines, instructions and equivalent documents that control and support business operations are also published on the intranet.
Follow-up
The Company continuously evaluates the internal controls concerning financial reporting, primarily by asking questions and familiarizing itself with the work of the controller function.
The Board receives quarterly reports of financial results, including management’s comments on business operations. At every Board meeting, the financial situation is addressed. The Company’s auditors participate in Board meetings on two occasions annually and provide information about their observations of the Company’s internal procedures and control systems. On these occasions, the members of the Board have an opportunity to ask questions. On an annual basis, the Board takes decisions on significant risk areas and evaluates the internal controls.