Guidelines on Corporate Governance, 7th edition, with changes from the 6th edition marked.
Shareholders’ Meeting
The Annual General Meeting (AGM) and any other shareholders’ meeting of the Company.
Major Shareholder
Any individual or legal entity that controls at least 10% of the total share capital or voting rights in the Company, alone or in cooperation with associated parties.
Associated Parties
Individuals or legal entities connected with a person in such a way that their interests may be considered aligned or connected.
Closely Related Company
A company in which the Company controls, directly or indirectly, at least 10% of the total share capital or voting rights.
If the Company controls 50% or more of the total share capital or voting rights in another company, it is considered to have indirect control over that company’s holdings in other companies.
Chief Executive Officer (CEO)
The person responsible, under the authority of the Board, for the day-to-day operations of the Company. The CEO forms part of the Day-to-day Management under these Guidelines.
Day-to-day Management
The CEO and those persons who participate in the senior management of the Company and are responsible for its Day-to-day Management and operations. The term generally includes the executive management team or an equivalent management group, as applicable.
Sub-committees
Committees appointed by the Board to address defined tasks under its authority, such as the Audit Committee and Remuneration Committee. The Board remains responsible for the work and decisions of its Sub-committees.
Stakeholders
Parties with direct or indirect interests in the Company’s activities, including shareholders, investors, employees, customers, creditors and society as a whole.
The main objective of the Guidelines is to contribute to good corporate governance by clarifying the roles and responsibilities of managersthe Board and Day-to-day Management and enabling them to perform their tasksduties, while simultaneously securingsafeguarding the interestinterests of shareholders and other stakeholders and other invested parties.. The Guidelines includecontain recommendations over and above those laid down in the relevant legislationaddition to laws and regulations, while the "“comply andor explain“” principle ensuresprovides greater flexibility than such rules, as it is difficult to setestablish standards that are suitable forsuited to companies of all types and sizes.
One must bear in mind that the Act on Public Limited Companies stipulates that companies must have authority and responsibility within a company shall be divided between three decision-making bodies in a hierarchical relationship to one anotherprincipal elements: the Shareholders’ Meeting, the Board of Directors and the Chief Executive Officer (CEO). The power and influence of shareholders is thereby limited to the Shareholders’ Meetings, while In this edition of the Guidelines, greater emphasis has been placed on the Board seeks its authority from the Shareholders’ Meeting and carries out the supreme significance of these boundaries of authority between Shareholders’ Meetings. It is then the responsibility of the Board to recruit the Chief Executive Officer (one or more) and calland the importance of maintaining them to account regarding the operations of the Company. The CEO is responsible for the day-to-day management of the Company and shall pursue the policies and instructions of the Board. A vital part of good corporate governance is following this three-way division of roles and responsibilities, bringing about a clear distinction between the powers and responsibilities of each party, and ensuring that the parties involved do not encroach on matters that are the responsibility of another..
The layout of the Guidelines is the same as in the previous versionsversion. The Guidelines which it is recommended that companies need to comply with or explain deviations from are in a numbered sequence. A short introduction in a shaded text box can be found at the beginning of most chapters of the Guidelines. This introductory text is meant to clarify the Guidelines contained in each chapter, and companies are not required to report non-compliance with such remarks. Many provisions have additional commentary that is marked specifically as such. Companies are not required to report non-compliance with such commentary...
This version of the Guidelines is applicableenters into force as of 1 July 2021. 1st of January 2027.
The Guidelines on Corporate Governance are specifically targetedprimarily directed at companies that qualify as public-interest entities. Due to changes to the The concept is based on Act on No. 94/2019 on Auditing and Auditors No. 79/2008 and the Act No. 3/2006 on Annual Accounts No. 3/2006, the guidelines apply to a greater number of companies than the previous version. The guidelines refer to units in operation which mayand covers entities generally be seen as public-interest entity. Included, therefore, are companies that have their considered important to the national economy. These include, among others, companies whose securities listedhave been admitted to trading on a regulated market, pension funds, credit institutions, insurance companies, together with certain fisheries and other large companies, industrial companies, energy companies, aircraft operators, telecommunications companies and vessel operators engaged in international goods transportation. In addition, attention is brought to the new and groups of significant economic and societal importance.
Attention is drawn to the increased obligations ofimposed on larger companies who are considered large within the sense of the Act and the parent companies of large, consolidated companies as defined in Article 66 of the Act. It should be noted that financial groups pursuant to the Annual Accounts Act, including in relation to disclosure and the responsibilities of the Board. Financial undertakings, and insurance companies and companies with securities listed on a regulated market must follow are furthermore legally required to comply with recognised Guidelines on Corporate Governance.
The Guidelines on Corporate Governance can, however, benefit all companies, regardlessirrespective of their size and activities, while the ". The “comply andor explain principle“ enables” approach allows companies to adapt themtheir governance to their own circumstances. It is furthermore desirable for State-owned enterprises to adhere to Guidelines on Corporate Governance in their operations and thereby supports the focused and efficient implementation of good corporate governance.
The Guidelines on Corporate Governance are based on the "comply or explain“" principle. The principle allows company boards the flexibility to decide the extent to which certain aspects of the Guidelines apply to their companies. As such, a company can be considered to adhere to the Guidelines even if it deviates from some of its standards. The "comply or explain“" principle does however place on boards the burden of providing a detailed explanation for all deviations from the Guidelines in the Company’s corporate governance statement.
The substance of the Guidelines require that the boards of companies critically examine the organisation of the aspects to which the Guidelines apply in the Company in question and that they independently evaluate whether the arrangement is reasonable or justifiable. In addition, it is an important aspect of the Guidelines to increase transparency and information disclosure to shareholders and other stakeholders, ensuring that they gain a clear picture of the manner in which the work and framework of the Board is arranged. Explanations of deviations are intended to increase transparency. Well-reasoned deviations can, therefore, be considered good governance.
The "comply andor explain“" principle offers flexibility for companies to appropriately tailor the Guidelines on Corporate Governance to their size, structure and sector. This also encourages boards and managers to contemplate and evaluate their own corporate governance conduct regularly.
If a company decides to deviate from the Guidelines on Corporate Governance, it will increase transparency to explain the following aspects:
the way in which the Guidelines have been deviated from;
why the Guidelines have been deviated from;
whether there is a reason to take action to mitigate deviations.
Ifif the deviation is temporary, such temporary deviation should be mentioned specifically.
These explanations should be clearly set forth in the Company’s corporate governance statement, so that shareholders, investors and other stakeholders can easily familiarise themselves with their content. The characteristics and special circumstances of the relevant company – such as size, organisation and ownership of the Company – shallshould be outlined.
It should be noted that numerous aspects in the Guidelines on Corporate Governance are based on established laws and regulations. Companies may not deviate from these aspects of the Guidelines unless laws or regulations permit such deviations.
Shareholders hold the decision-making powers in the affairs of the Company at shareholders’ meetings. Shareholders’ meetingsMeetings. Shareholders’ Meetings are the supreme authority in the Company’s affairs. The meetings mustshould be organised and run so as to enable shareholders to exercise their decision-making powers in an effective and informed manner.
1.1.1Power and responsibilities within the Company shall be clearly divided between the Shareholders’ Meeting, the Board and the CEO, and that separation of roles shall be respected in practice. Shareholders’ powers and influence are limited to Shareholders’ Meetings. The Board derives its authority from the Shareholders’ Meeting and directs the affairs of the Company between Shareholders’ Meetings. The Board is responsible for appointing the CEO and holding the CEO accountable for the Company’s operations. The CEO is responsible for the day-to-day operations and shall follow the policies and instructions of the Board.
Comment: Good corporate governance depends in particular on the division of powers and responsibilities envisaged by the three-tier structure of the limited company form, clear boundaries between each party’s authority and responsibility, and ensuring that no party intervenes in matters reserved to another.
1.2.1When organising the AGM, the Board shallshould do so in a manner that allows shareholders to exercise their decision-making powers and express their opinions. Unless otherwise provided for in the Articles of AssorciationAssociation of a company, it shall, for instance, be madethe Board can make it possible for shareholders to participate in the AGMa shareholder’s meeting by electronic means, partially or fully, including the possibility to vote without being physically present.
Comment: When preparing the AGM, it is important to ensure the participation of shareholders and ensure they have an opportunity to present their views. In this way, shareholders can be involved in the direction and development of the Company in the short and long term.
1.2.2When the time and date for the AGM hashave been decided, preferably no later than two months before the end of the Company’s accountingfinancial year, this information shallshould be posted on the Company’s website, together with the deadline for shareholders to submit motions and/or proposals to be discussed at the meeting.
1.2.3The meeting notice and other documents relevant to the AGM shallshould be available to shareholders in sufficient time and in such a form as to give shareholders sufficient opportunity to form a well-founded opinion on the issues to be raised at the meeting.
1.2.4The meeting notice shallshould specify the language to be used at the meeting and the language of the documents for the meeting. If the meeting is conducted or if the documents are in a language other than Icelandic, the main points of the agenda shallmeeting should also be available in an Icelandic-language summary. In addition, the notice shallshould specify if interpretation of the introductory talks and translations of the documents will be made available to the shareholders.
Comment: Meeting minutes should It is preferable for meeting documents/materials to be made available in English if overseasforeign ownership is significant.
1.2.5The proposals of the Nomination Committee, if such a committee has been established, and other candidacies shall be presented infor the Board, if available, should accompany the meeting notice.
1.2.6The Board shallshould post the following information on the candidates to the Board on the Company’s website as early as possible, and no later than two days before the Annual General Meeting.
Comment: If the Shareholders’ Meeting appoints a Nomination Committee, the Company should make appropriate information on candidates for that Committee available on its website in the same manner as information on candidates for the Board.
1.3.1The Chairman of the Board and the required majority of the Directors shallshould be present at shareholders’ meetingsShareholders’ Meetings, as shallshould the Chief Executive Officer (CEO).
1.3.2The Auditor of the Company and at least one member of all of the Board’s subSub-committees shallshould be present at the AGM.
1.3.3If the Company has a Nomination Committee, at least one Committee member shallshould be present at the AGM.
1.3.4A person nominated party and other candidatesor standing for election to the Board membership shallshould be present at the Company’s AMG unless there is a valid reason for their absenceAGM.
1.3.5If circumstances prevent the managementaforementioned representatives of the Company from attending a shareholders’ meetingShareholders’ Meeting, their participation shallshould be ensured by other means e.g. electronically.
1.4.1The Board shallshould ensure that there is an effective system for updating the share registry so it contains correct information at all times. Information on shareholders’ voting rights shallshould be entered into the registry. The registry shallshould also state any associations the Company has with corporate groups.
Comment: It is preferable for the share registry to give information on the representatives of the legal entities registered as shareholders in the Company. When assessing whether or not a given representative should be registered in the share registry, account may be taken, for instance, of how many shares the respective shareholder holds.
1.4.2The Company’s share registry shallshould be readily available to shareholders at the shareholders’ meetingShareholders’ Meeting, either in print or in electronic form.
The role of the Nomination Committee is to propose candidatesnominate individuals or a group for election to serve as Directors on the Board. The purpose of the Nomination Committee is:
1.• To create a venue to provide information on candidates to the Boardformal channel through which Board candidacies may be presented.
2.• To assess the eligibility of individual candidates to fulfil their rolesthe role of Directors on the Board.
3.• To ensurepromote a candidate pool for Board election that the group nominated to serve as Directors on the Board has sufficient breadth of experience as regards knowledge, experience and background based on the policies, needs and operation of the company.
4.• To ensure that the nominated group consists of a sufficient number of persons of both genders.
In its work, the Committee shallshould promote the interests of all shareholders and giveactively engage with shareholders the opportunity to state their views during the nomination process. The Committee should also inform shareholders how they may propose candidates for Board membership.
Comment: The Nomination Committee, if such a committee has been established, has an advisory role in the selection of Directors and proposes candidates to the AGM. or another Shareholders’ Meeting at which Directors are elected, where practicable. Directors, however, are elected by the AGM or Shareholders’ Meeting, in accordance with the relevant legislation. By establishing a Nomination Committee, clear arrangements are made for the nominationpreparations of the Board of DirectorsElections at the Company’s AGM. or Shareholders’ Meeting. This, among other things, lays the foundation for informed decision-making by shareholders. In addition, itThe purpose of this process is to increases the likelihood that the Company’s Board will possess diversity and breadth in capabilities, experience and knowledge. This is because the Committee is expected to take these aspects into account when preparing nominations of Directors.
The Nomination Committee may nominate a greater number of nominees than the number of Board seats to be voted on. In order to ensure that it is possible to take into account views on diverse composition, the Nomination Committee may set forth proposals for two or more groups of Directors of the Board. Companies that do not establish a Nomination Committee should, in the Corporate Governance Statement, provide information on the manner in which the nomination procedure is to be carried out.
1.5.1The shareholders’ meeting shallShareholders’ Meeting should appoint members to the Nomination Committee or decide how they should be appointed. The manner in which the appointment is made shallshould be indicated in the Company‘s corporate governance statement.
Comment: The shareholders’ meetingShareholders’ Meeting can, for instance, decide that the Board should appoint the members of the Nomination Committee.
1.5.2The Nomination Committee shallshould consist of at least three members, the majority of whom shallshould be independent of the Company and its dayDay-to-day management.Management. The same criteria shallshould apply to the assessment of committee members as to the assessment of the independence of Board members. The Committee may consist of two members, but in this case both members shallshould be independent of the Company. At least one Committee member shallshould be independent of major shareholdersMajor Shareholders.
1.5.3Members of the Board of Directors may be members of the Nomination Committee but mayshould not constitute a majority of the Committee. They shall not chair the Nomination Committee. This applies equally to the Chairman of the Board as other members of the Board.
Comment: The Nomination Committee should preferably possesses knowledge and experience of business operations and management and have a comprehensive view of the work of the Company’s Board and an understanding of the tasks and challenges facing the Board. Membership of a Board member on the Nomination Committee could be a good option to ensure a comprehensive view and understanding, but this goal may also be achieved by defining clear channels of communications and ensuring communication venues between the Nomination Committee and the Board and Shareholders. However, it may be undesirable for a Director to serve as Chair of the Nomination Committee.
1.5.4Neither the Company’s managersDay-to-Day Managers nor its employees shallshould be members of the Nomination Committee.
1.5.5The Company shallshould announce the names of members of the Nomination Committee on its website no later than six months before the AGM.
Comment: This time requirement mustshould especially be kept in mind if the AGM has delegated to the Board or another party the task of appointing the Nomination Committee.
1.5.6Shareholders’ meetingsMeetings should determine the role of the Nomination Committee and the manner in which its operation shall be carried out. The needs of the Company are toshould be taken into account when determining this role.
Comment: In its determination of the operation of the Committee, shareholders may establish rules of procedure for the Committee or e.g. decide to delegate this task to the Board. Shareholders should preferably take a position on the arrangement of payments to the Committee and its authorisations, e.g. involving consultants in the execution of its duties. Provided that the Committee has authorisations to do so, it should ensure the independence of such consultants. The same criteria shallshould apply to the assessment of the independence of consultants as to the assessment of the independence of Board members.
1.5.7The Nomination Committee shall proposeshould, where practicable, nominate candidates for membership of the Company’s boardBoard before its AGM or a shareholders‘ meeting inanother Shareholders’ Meeting at which Board membersDirectors are elected.
1.5.8The role of the Committee shallshould include:
1.5.9In the execution of its duties, the Committee shallshould take into consideration the collective interests of all shareholders. The role and main duties of the Committee shallshould be specified in the Committee’s rules on working proceduresof procedure and shallshould reflect the needs of the Company. The rules of procedures shallprocedure should be posted on the Company’s website.
Comment: In the execution of its duties, the Committee may gather relevant information fromshould approach the current Board and the Board’s subSub-committees to gather relevant information.
1.5.10The Committee shall requestshould call for candidates for election to the Board of Directors and candidate proposals from shareholders in a timely manneras soon as possible before the Company’s AGM or a shareholders‘ meetingShareholders‘ Meeting in which elections to the Board take place.
Comment: It is appropriate for the Nomination Committee to request candidacies and proposals from shareholders in good time so that is has sufficient time to assess the submitted expressions of interest in candidacy and proposals and candidatures. Where a Shareholders’ Meeting at which Directors are to be elected is convened at the request of shareholders, the Nomination Committee may be tasked with assessing the suitability of candidates for election to the Board of Directors. In such cases, the Nomination Committee may first call for candidates only once it becomes clear when the meeting is held.
1.5.11The Company’s website shallshould give information on how shareholders can submit proposals for Board appointmentsproposals to the Committee and how other individuals can submit their candidacy.
1.5.12The Nomination Committee’s proposals (, and, if relevant, other candidacies) shall, should be presented alongside the notice of the AGM or shareholders‘ meetingShareholders‘ Meeting in which elections to the Board take place, and shall. They should also be accessible to shareholders on the website of the Company as soon as possible, and no later than at least two days before the meeting.
Comment: Shareholders should preferably be given sufficient time to familiarise themselves with the proposals of the Committee and other candidates for the Board so they can make an assessment thereto and respond appropriately. Accordingly, the Nomination Committee’s recommendations should generally be presented before the expiry of the nomination period for board elections. A candidate who was not nominated by the Committee may request that the Committee include information about his or her candidacy in its report.
1.5.13At the Company’s AGM, or shareholders‘ meetingShareholders‘ Meeting in which elections of the Board take place, the Committee shallshould inform the meeting of the manner in which it has arranged its work and explain its proposals. The Committee’s reasoning shallshould also be available on the Company’s website.
The Board of Directors holds supreme authority between shareholders’ meetings.Shareholders’ Meetings. It shall ensureensures that the Company’s organisation and operations are in a good state. It shall promote, promotes the development and long-term performance of the Company and supervisesupervises its day-to-day operations.
2.1.1The main roles of the Board are as follows:
To hold supreme authority between shareholders’ meetingsShareholders’ Meetings, promote the development and long-term performance of the Company and supervise its day-to-day operations. The Board shall
To regularly assess the performance of the Company’s executive directorsDay-to-day Management and how the Company’s policies arestrategy is implemented.
To take the initiative, together with the CEO, in formulating policies and setting goalsstrategies and risk parameters for the Company, both in the short and long term.
To establish an active system of internal controls. This means, among other things, that the arrangement of the internal controls system shallshould be formalised, documented and its functionality verified regularly.
To safeguard the interests of all shareholders at all times, to treat all shareholders in the same share class equally and to maintain equality among them.
To ensure that the Company’s operations are in conformity with existing laws and regulations.
To administer the recruitment and dismissal of the Company’s CEO.
The Board mustshould be of a size and composition that enables it to execute its duties efficiently and with integrity.
2.2.1The composition of the Board shall take into accountshould be aligned with the operationCompany’s operations and policies of the Companystrategy, its stage of development and other relevant factors in its operations and environment. The Board shall displayshould reflect diversity and breadth in qualifications, experience and knowledge and the goal shall be for gender distribution toratios should be as equal as possible.
Comment: Company boards are meant to provide managers with supportchallenge and encouragement andencourage Day-to-day Management, to ensure, as far as possible, that the organisation and operations of the Company are in a good state. It is important for the Board to consist of individuals with the necessary knowledge and experience to execute their duties diligently. It is just as important to make efforts to achieve reasonable breadth of education, professional background, age, gender, knowledge knowledge and experience and ensure that important components are not lacking.
An important role fulfilled by Boards of Directors is to ask critical questions and speculate on different views for the purpose of raising the quality of decision-making. A suitable breadth provides the option of increasing the depth of interactionsdiscussions, and this, in turn, will ensure that the greatest possible benefit fromof a multi-member board. If there is no Nomination Committee operating in the Company, theThe Board should preferably assess, on a yearly basis, what competencies Board members should have to take onaddress the issues of the Company and, in addition, the manner in whichCompany’s affairs, as well as the composition and diversity of the Board is ensuredas a whole.
2.2.2OnlyNo more than one Board member canshould be a Directorpart of the Day-to-day Management of the Company, a member of its executive board or its subsidiaries’.
Comment: The PUBLC Act on Public Limited Companies allows for company mangerscompany’s Day-to-Day management to serve on the Board as long as they do not constitute a majority of the Board. The Guidelines therefore recommend stricter limits on the number of executive managersDay-to-day Management on the Board than the relevant legislation does. This is because one of the most important duties of the Board is to monitor the day-to-day runningoperations of the Company and the Company’s managers.Day-to-day Management. If company managers makeDay-to-day Management makes up 40% of the Board, e.g. if two out of five Board members are executive managerspart of the Day-to-day Management of the Company, this reduces its capacity to carry out its supervisory duties over managers. . In larger Boards, a deviation from this standard may be justified, provided that Day-to-day Management does not comprise more than one fifth of the Directors and the Board’s supervisory role is safeguarded. Any such deviation should be disclosed in the Corporate Governance Statement.
To help the Board work forin the interests of the Company and all of its shareholders, Directors shallshould be independent from the Company, its executive managers and major shareholders.
Day-to-day Management. The independence of the majority of the Board of Directors with respect to the Company is important in order to be able to conduct an independent and objective assessment of the work of the managersDay-to-day Management.
It can be important that some of the Board members are independent of major shareholders in companies with distributed ownership, as this will accord with views on active ownership and the protection of minority shareholders.
2.3.1The majority of Directors shallshould be independent of the Company and its dayDay-to-day managersManagement.
Comment: One of the most important duties of the Board is to monitor those who are responsible for the Company’s day-to-day operations. If a Director is connected with the Company in any manner that may give cause to question whether their own interests could affect their decision-making towards the Company and its executive managersDay-to-day Management, this reduces their ability to carry out their supervisory role over managersDay-to-day Management.
2.3.2A Director is not independent of the Company and its dayDay-to-day managersManagement:
if he/she is or has been an employee of the Company, or a company closely related to the Company in the three years prior to the commencement of Board membership;
if he/she receives or has received significant payments from the Company, a company closely related to the Company or its dayDay-to-day managersManagement, apart from a Director’s fee, e.g. as a consultant or contractor, in the three years prior to commencement of Board membership.
if he/she is in, or has in the past year been in, significant business with the Company or closely related companies, e.g. as a customer, supplier or partner, or if he/she has other significant business interests in the Company, whether personally or through another company;
if he/she is onepart of the dayDay-to-day managersManagement of another company in which, one of the Directorswhose board members is a daymember of the Company’s Day-to-day managerManagement;
if he/she is or has been, in the past three years prior to taking a seat on the Board, a partner of the external auditor of the Company or a closely related company or an employee who has taken part in the external audit of the Company;
if he/she has close family ties with any of the Company’s dayDay-to-day managersManagement or any other persons mentioned above, and that person is in direct or indirect business with the Company to such an extent that the Director could not be considered independent.
Comment: The ways described above in which a Director may be considered not independent are not exhaustive. It remains up to the Board to assess other factors where the interests of specific Directors, large shareholders and the Company itself might collide, whether in fact actually or in appearance.
The abovementionedabove-mentioned criteria for independence should not be interpreted in such a manner as to hinder necessary diversity and breadth amongst Board members. If a particular Director does not meet the listed conditions, the reason for the lack of dependencyindependence shall be stated in the Company‘s corporate governance statement. The corporate governance statement shall also indicate as well as how the Board intends to minimise the risk of conflicts of interest that may arise in his work as a Board member and prevent them from affecting decision-making. It should be noted that Board members who cannot be regarded as independent of the Company may well be competent to be Board members; the main issue is that Board members that are dependent on the Company should not have a majority on the Board and that circumstances are clearly stated in the Corporate Governance Statement.
To help the Board work in the interests of the Company and all of its shareholders, Directors should be independent from Major Shareholders. The independence of the Board in relation to Major Shareholders supports the principles of active ownership and the protection of minority shareholder interests.
2.4.1At least two of the Directors that are independent of the Company and its Day-to-day-to-day managers shall Management should also be independent of the Company’s major shareholders.Major Shareholders.
Comment: The recommendation that that two Board members shallshould be independent from major shareholdersMajor Shareholders aims to support the Board in operating for the benefit of the Company and all of its shareholders. Although theThe recommendation will likely result in reducing the influence of major shareholders, it does allow foris not intended to preclude the majority of the Board members to be relatedfrom having ties to major shareholdersMajor Shareholders in one way or another. The recommendation therefore simultaneously supports active ownership and the protection of minority shareholders.
2.4.2When determining whether a Director is independent of the Company’s major shareholders,Major Shareholders, a general assessment shallshould be made of all direct and indirect relations withties to the relevant shareholder. A Director is not independent of the Company’s major shareholdersMajor Shareholders in the following circumstances:
Comment: As for independence towards the Company, these recommendations on independence towards major shareholdersMajor Shareholders are not meant to prevent the best possible composition of the Board in respect of the operations of the Company. If there are instances where a certain Director does not fulfil the aforementioned requirements but is perceived as very competent for the job based on their experience, education or other factors, the Company’s corporate governance statement shallshould indicate how the Board intends to minimise the risk of conflicts of interests that may arise in their work as Director and prevent them from affecting decision-making.
2.5.1The Board shall evaluate evaluates whether its members are at any given time independent of the Company and its major shareholders.Major Shareholders. If a Nomination Committee has not been appointed, the Board shallshould also evaluate the independence of Board candidates before the Company’s AGM or shareholders‘ meetingShareholders‘ Meeting in which Board members are elected, and its conclusions shallshould be made available to shareholders.
2.5.2Directors of the Board shallshould provide all relevant information to facilitate the assessment of their independence and give notification of any changes to their circumstances which might affect whether they could be considered independent. Board candidates shallshould provide the Nomination Committee with the same information. They shallshould provide at least the following information:
Age, education, chief occupation and professional experience.
Date of first election to the Board.
Other commissions of trust, e.g. membership on boards of other companies.
Shares in the Company, whether direct ownership or through associated parties.
Information on work carried out for the Company.
Connections with the Company’s main clients and competitors and major shareholdersMajor Shareholders in the Company.
Other connections with the Company as described above, if applicable, as well as the evaluations of the Board and the Nomination Committee on whether the Director is considered independent.
The Board mustshould seek to engage in regular discussions on how it intends to discharge its dutiesoperate, the areas on which it will focus, what communication and procedural rules of procedure will be upheld and what the main goals of the Board are.
2.6.1The Board shallshould annually define its significant assignments, goals and strategystrategic direction of the Company and make a plan for the execution of its duties.
2.6.2The Board’s work shallshould in general take place at Board meetings. In the event of communication between Board members and/or between Board members and the Company’s executive directors outside the board-roomDay-to-day Management regarding decisions taken by the Board or the grounds for such decisionsboard decision making, this shallshould be disclosed at the beginning of the next Board meeting.
Comment: It is important for Board members to all possess the same information so that a critical discussion can take place in Board meetings. This is especially important when a new board is assembled or when a new Board member takes a seat on the Board.
2.6.3All information necessary for Board members to form an informed opinion on matters shallshould be delivered to them in a timely manner before Board meetings.
2.6.4The Board shallshould convene regularly enough for it to be able to discharge its duties in an efficient manner.
Comment: The Directors shallshould preferably agree on the number of meetings estimated for the year. This improves organisation of the Board’s work and implies that Directors also agree that they are able to execute their duties satisfactorily during that time.
The Board’s rules of procedure deal with the allocation of tasks among Directors and the relationsinteraction between the Board, the Chairman of the Board and the CEO. The rules make it easier for shareholders to assess the working practices of the Board.
2.7.1The Board shallshould establish its own written rules of procedure further addressing the role and execution of the work of the Board.
2.7.2The Board shallshould review and revise its working procedures rules of procedure annually.
2.7.3The Board’s rules of procedure shallshould at least cover the following:
Allocation of tasks among Directors.
Job description of the Board and the Chairman of the Board.
The division of responsibilities between the Board and the CEO, e.g. delegation of power to the CEO, i.e. what decisions should be considered to be unusual or major of significance and therefore under the sole authority of the Board.
The convening of Board meetings, their frequency, participants and the arrangement of meetings.
Communications between Directors, between Directors and dayDay-to-day managersManagement outside Board meetings, between the Board and shareholders and between the Board and the Company’s auditors.
Decision-making powers and voting among Directors.
Documents for Board meetings, Directors’ access to documents before and after Board meetings and handling of meeting documents.
Minutes of Board meetings.
Board subSub-committees, their duties and decision-making powers.
Procedures for accepting new Board members, concerning information and guidance in the workings of the Board and the Company.
Procedures for annual performance assessments.
Gathering and disclosing to the Board information from the CEO, the subSub-committees and independent experts.
Professional secrecy and confidentiality.
Ineligibility.
Disqualification due to conflicts of interest
Links to other rules within the Company, such as guidelines on good corporate governance and other rules as applicable, e.g. from the Financial Supervisory AuthorityCentral Bank and Nasdaq Iceland.
It is important that the Board regularly evaluates the performance of the Company. For that purpose, the Board shall evaluate its own work and the work of the CEO and the Company’s operations.
2.8.1The Board shallshould annually review and evaluate the development of the Company and whether this is consistent with its goals.
2.8.2The Board shallshould, under pre-determined arrangements, conduct an annual assessment of its work, size, composition and procedures. The Board shallshould seek ways to improve its workings in accordance with the findings of these assessments. The results of the assessment are to be aveilableavailable to the Company‘s Nomination Committee, if one has been appointed. The assessment should also include an evaluation of the work of the Board’s Sub-committees and of the Chief Executive Officer’s contribution to the work of the Board.
Comment: It shall be noted that the assessment also includes an evaluation of the work conducted by sub-committees of the Board and the contribution of the CEO to the work of the Board. The assessment shallshould include whether or not the Board has operated in accordance with its own rules of procedure. It shallshould be taken into account whether or not important company matters are adequately prepared and if sufficient time is provided for discussion. Additionally, the contribution of individual Board members shallshould be considered, as regards attending and participating in meetings. Evaluations of individual Board members should preferably be carried out in an anonymous manner. Such assessments could, for instance, be carried out by means of anonymous electronic survey administered by a third party. Open discussions within the Board on the manner in which to work on continiouscontinuous improvements is, moreover, an important part of the self-assessment of the Board.
2.8.3The Board shall annually evaluate evaluates the work of the Company’s CEO and the Company’s operations in general. on an annual basis. Any Board member who is also onepart of the Company’s dayDay-to-day managers shallManagement should not be present for the evaluation of the performance of the CEO. The Chairman of the Board shall present presents the results of the assessment to the CEO and discussdiscusses with themthe CEO how to address weaknesses and/or further improve strengths.
The Company’s remuneration policy shallshould state the fundamental basis for the remuneration of the Company’s Directors and its managersDay-to-day Management and the Company’s policy regarding contracts with managersDay-to-day Management and Directors. The policy shallshould also state if and under what circumstances and to what extent it is permitted to remunerate managersDay-to-Day Managment and Directors in addition to their fixed salaries.
2.9.1If the Company has appointed a Remuneration Committee, the Committee shallshould submit a remuneration policy proposal for the Company in accordance with Section 5.4. Otherwise it shall beis the responsibility of the Board.
2.9.2The Board shallshould publish the Company’s remuneration policy proposal in connection with its AGM, e.g. on its website, and the remuneration policy shallshould be approvedpresented for approval at the AGM, with or without amendments. At the AGM, the terms pertaining to individual managersmembers of Day-to-day Management and Directors of the Company shallshould be made known, including wages, earned pension payments, other payments and benefits, as well as any changes to terms between years.
2.9.3All documents forming the basis for the remuneration policy shallshould be made accessible to shareholders no later than two weeks before the AGM. The documents shallshould be prepared in such a way that shareholders find it easy to form an opinion on the remuneration policy and its effects.
2.9.4At the AGM, special focus shallshould be placed on the total expenditure of the Company in respect of its remuneration policy and the meeting shallshould be informed about any authorisation to issue stock options that may thin out the value ofdilute shareholders’ stocksholdings. The AGM shallshould be informed onof the estimated cost of option plans and onof the execution of the previously approved remuneration policy. This shallshould be done to enable shareholders to fully understand the structure of the employment terms of Board Directors, the CEO and other managersmembers of Day-to-day Management.
2.9.5If the Company‘s Board of Directors deviates from the remuneration policy, such deviation shallshould be substantiated in each individual instance in the minutes of the meetings of the Board of Directors.
2.9.6If it is planned to give managersDay-to-day Management and other employees stock option rights, or any other form of remuneration based on stock price development, the main provisions of such contracts and/or plans shallshould be submitted to a shareholders’ meetingShareholders’ Meeting for approval. Such main provisions include: the total number of shares in the plan, the maximum length of option agreements, the period in which employees can exercise such rights, criteria for the determining the purchase price and terms, in the event of a loan.
2.9.7The Company’s remuneration policy shallshould contribute to the interests of the Directors and dayDay-to-day managersManagement being genuinely related toaligned with the long-term results of the Company. It shallshould also prevent the remuneration terms for managersDay-to-day Management from being such as to encourage excessive risk-taking.
Comment: That may include the following:
Variable wages should be a reasonable proportion of overall wages. The remuneration policy should provide for maximum variable wages.
Variable wages should be linked to pre-determined and properly defined goals that reflect the Company’s actual growth and actual financial benefits in the long term for the Company and its shareholders..
Wages of Directors shall Directors’ remuneration, including remuneration for service on Sub-committees, should reflect their responsibilityresponsibilities, expertise, experience and the time required to executeperform their duties.
Directors should not have any stockreceive shares, call or put options, priority-buy options or buy-or-sell options on stock in the Company and should not receive anyany other type of remuneration linked to shares in the Company or the development of share prices.
Satisfactory risk management and internal controls are essential for the Board to execute its statutory duties. Satisfactory risk management and internal controls increase the likelihood that a company’s activities and operations are in an acceptable state, that legislation and regulations are being followed, that the annual accounts and decisions of the Board are based on correct and conclusivesufficient data.
2.10.1The Board shallshould define, at least once a year, the risk factors that the Company has to address, including their nature and extent. It shallshould also define remedial actionresponses to the risks in question.
Comment: Risk management is a process of analysing and measuring the risk factors which could prevent the Company from achieving set goals. It also includes remedial action is taken to minimise the anticipated effects of such risk factors. To this end, the Board should assess on an annual basis aspects such as the Company’s finance, liquidity and equity and perform stress tests if appropriate.
2.10.2The Board shallshould ensure the existence of a satisfactory system of internal controls that is formal and documented. Internal controls shallshould provide reasonable certainty that the Company can attain its goals as regards:
success and efficiency in operations;
providing dependable and justifiedproper financial information to external parties;
complying with laws and regulations that apply to the business.
Comment: Active internal control is a process made by the Board and dayDay-to-day managersManagement. Internal control is inter-linked with the Company’s operations and intended to facilitate the Board’s and day-to-day manager’s task of supervising its operations. The internal control system also formalises the manner in which the Company works towards its goals, distributes responsibility in its internal activities and explains the responsibility of the Board in such work. Internal controls and risk management should also support the reliability of the information on which the Board bases its decisions and which it confirms in the Company’s disclosures.
2.10.3The Board shallshould regularly verify the effectiveness of internal controls and risk management. The Board may delegate the implementation of certain aspects of internal controls to parties within the Company. However, it should be done in such a manner that the Board is always informed of its progress. When responsibility for the implementation of control activities is delegated to particular sub-units or managersDay-to-day Management within the Company, this should be done formally so that there is no uncertainty as to where responsibility lies and how to respond to deviations.
By setting a policy of sustainability, the Company contributes to a better economyhealthier business environment and improved relations with invested parties.stakeholders. In this way, it also reinforces its operating basis with an improved perception of trust and credibility, increased risk awareness, happier employeesreduced waste, higher employee satisfaction and improved competitiveness. By establishing a policy of diversity, the Company increases the likelihood of gaining a wide range of knowledge, experience and insight which is necessaryessential for the optimalsuccessful future development of the Company. Clear ethical standards can also strengthen the company’s culture, mitigate the risk of reputational damage, and promote sound business practices.
2.11.1The Board shall setshould establish a policy for sustainability policy for the Company and a written code of ethics for the Company’s Board members, its managers and employees.
Comment: TheA focus on sustainability addresses the Company’s responsibility for the effect thateffects of its operations have on people, the communitysociety and the environment. The Company shall set out its policy on its should establish a sustainability and its interactionpolicy and a policy for stakeholder engagement, together with invested parties and form practicesprocedures to ensure compliance with that policyfollow-up. Such a policy should address issues such as employee rights, human rights, regulatory compliance, environmental and climate issues, health and safety, social involvement and anti-corruption measures. The Board shall decide, in cooperation with employees and other possible invested parties, the standards of ethics on which the Company’s conduct is based.
The Board shallshould ensure that sustainability matters considered material to the Company’s activities are taken into account in its strategy, risk management, internal controls and the Company’s disclosures.
2.11.2The Board should establish the Company’s policy on diversity in connection with the Board, executive management and senior management and shall, each year, discuss the actions of the Company to implement such policyDay-to-day Management.
Comment: The policy on diversity should take account of issues that strengthen the abilities necessary for management within the Company and which support its future development. It is important to pay attentionAttention should be paid to the composition of the Board, executive management and senior managementDay-to-day Management as regards education and professional background, age, gender, knowledge, experience and capability.
2.11.3The Board should establish written ethical standards for the Board, Day-to-day Management and employees.
Comment: The Board determines, in consultation with employees and, where appropriate, other stakeholders, the ethical standards on which the company’s operations are based.
2.11.4The Board should ensure that the policies and standards under this section are implemented in the Company’s activities, followed up formally and reviewed periodically to ensure that they remain appropriate. Policies and standards may be separate documents or form part of other comprehensive Company policies or rules.
The Board’s relations with shareholders should be based on honesty and be unambiguous and coordinated.
2.12.1All shareholders shallshould have the same access to information on the interests of the Company.Company’s affairs. Dissemination of information to shareholders shallshould therefore be limited to shareholders’ meetingsShareholders’ Meetings or the dissemination of uniform information to all shareholders simultaneously.
2.12.2The Board shallshould establish an effective and accessible arrangement for communications between shareholders and the Board so that shareholders have an equal opportunity to express their opinions to the Board. Shareholders should thereby have the opportunity to explain their views on the Company’s operations to the Board and to ask the Board questions.
2.12.3The Board shallshould be notified of all proposals or questions from shareholders and it shallshould supervise the Company’s response.
Board meeting minutes should give a comprehensive overview of meeting discussions, the documents presented for each agenda item and the substance of decisions made by the Board.
2.13.1Directors shallshould confirm the minutes with their signature.
2.13.2The following information shallshould be present in the minutes of the Board:
Name and national identification number of the Company.
Meeting place, date and time.
Number of the board meeting.
Attendance at the meeting.
If and when third parties attend, e.g. the Company’s auditor, and when they exit the meeting.
Name of the Chair and Secretary of the meeting.
Agenda of the meeting, including whether individual items were designated for information or decision.
Documents made available to Board members before the meeting or handed out or presented at the meeting. A copy shallshould be kept with the minutes.
Conclusion of each agenda item of the meeting, e.g. decisions made, items postponed, inquiries made during the meeting.
Whether and why a board member, the CEO or another person leavesleft the meeting during a discussion or decision-making of an agenda item and whether the relevant party had access to documentation related to the discussion or decision-making.
2.13.3Minutes of Board meetings shallshould be made accessible to all Board members as soon as possible.
The Chairman of the Board is responsible for the Board fulfilling its role in an effective and organised manner.
3.1.1The proceduralBoard’s rules of the Board shallprocedure should contain provisions describing the duties and responsibilities of the Chairman of the Board. This job description should contain provisions stipulating that the Chairman of the Board should:
help ensure that the procedures of the Board are in conformity with legislation, regulations and good corporate governance and that the Board is provided with the best possible working conditions;
keep all Directors informed of issues concerning the Company and encourage the activity of the Board in all discussions and decision-making;
ensure that new Directors receive necessary information and guidance in the procedures of the Board and the Company’s affairs, including the Company’s policies, its objectives, risk parameters and operations;
ensure that the Board regularly updates its knowledge of the Company and its operations, in addition to ensuring that the Board generally receives, in the course of its work, detailed and explicit information and data in order to be able to perform its work;
ensure that Directors gets proper guidance regarding the main issues involving corporate governance, e.g. regarding their statutory duties and responsibilities, or ensure that Directors attend courses of that type;
take responsibility for relations between the Board and shareholders;
take the initiative in the preparation and revision of the Board’s rules of procedure;
organise the agenda for the meetings of the Board, together with the Company’s CEO, and superviseis responsible for their convening and chairing. The Chairman of the Board shallshould ensure that Board meetings allow ample time for discussions and decision-making, in particular for larger and more complicated issues;
follow progress in the execution of Board decisions within the Company and confirm their implementation to the Board;
ensure that the Board makes an annual assessment of their work and that of the subSub-committees.
Comment: Irrespective of these main responsibilities, it should be borne in mind that the position of Chairman of the Board does not, by law, come with any special rights or decision-making or implementation powers other than those of the Board as a whole. The Board may, however, mandate the Chairman to work on specific projectstasks on its behalf.
3.1.2The Chairman of the Board shallshould not take on any work or projectstasks for the Company other than those considered a naturalnormal part of his/her duties as Chairman of the Board, with the exception of specific projectstasks that the Board has entrusted to them.
Anybody elected as Director shallshould perform his/her duties with integrity and be able to devote the time required by such duties.
3.2.1Directors shallshould:
make independent decisions in each individualspecific instance and not favour the interests of specific shareholdersthe parties who appointedsupported them to the Board;
understand the role of the Board, their own role and responsibilities, as well as have knowledge of the laws and regulations that apply to the running of a business and the activities of the Company;
understand the objectives and projectsactivities of the Company and have an understanding of how they should organise their Board-membership responsibilities in order to contribute to the achievement of these objectives;
call for and study all documents and data that they deem necessary in order to have a full understanding of the operations of the Company and to be able to make informed decisions;
ensure that internal controls are in place and that the decisions of the Board are complied with;
verify that laws, rules and regulations are adhered to at all times in the Company’s operations;
foster a good atmosphere within the Board;
prevent their affairs, whether personal or business-related, from leading to a direct or indirect conflict of interests between themselves and the Company;
have sufficient time to execute their duties with integrity.
Comment: If a Director serves on multiple boards at the same time, it may beis possible that the individual in question is unable to effectively fulfil his/her duties. The extent of a Director’s duties varies between different boards and therefore it is not considered necessary to limit the number of boards that an individual can serve on. The risk of serving on multiple Boards simultaneously should however be borne in mind, especially as regards the possibility of conflicts of interests between companies. It should also be noted that legislation may provide for a limit to the number of boards an individual can serve on, for example in the case of Board members of regulated entities.
3.2.2Directors shallshould ensure that their views in connection with individual issues are entered in the minutes if they are not content with the decision-making of the majority of the Board.
3.2.3If a dispute causes a Director to resign, the Director in question shallshould indicate this in a written statement to the Board.
3.2.4Board members shallshould have access to independent expert consultants at the expense of the Company, if they consider it necessary to make independent and informed decisions.
3.2.5If the decisions of the Board pertain to the affairs of an individual Director, e.g. negotiations between the Company and the Director in question, such decisions should be taken by independent Directors of the Company. In addition, the Director in question should leave the meeting while the Board addresses such issues. A Director shallshould disclose issues of this type as soon as they arise, as well as if he/she becomes aware that he/she cannot be considered independent.
The CEO shallshould carry out the day-to-day operations of the Company and mustshall, in this respect, follow the policies and instructions laid downestablished by the Board. The CEO must at all times conduct his work with integrity and take account of the Company’s interests.
4.1.1The CEO shallshould provide personal information to ensure that shareholders are informed of main points relating to them. The following information on the CEO shallshould be published in the Company’s corporate governance statement:
Age, education, chief occupation and professional experience.
Date of appointment.
Other commissions of trust, e.g. membership on boards of other companies.
Shares in the Company, whether direct ownership or through associated parties.
Share-option agreements with the Company.
Connections with principal clients and competitors of the Company and major shareholdersMajor Shareholders in the Company.
4.2.1The CEO shallshould carry out the day-to-day operations of the Company in accordance with the policies and instructions laid down by the Board.
4.2.2The CEO shallshould ensure that Directors of the Board are regularly provided with accurate information on the Company’s finances, development and operations to enable them to perform their duties. The information shallshould be in the form and of the quality determined by the Board. Information and data shallshould be available to Directors in good time for Board meetings, and between such meetings. All Directors shallshould receive the same information. Moreover, the information shallshould be available when needed and as up-to-date and accurate as possible.
4.2.3The CEO shallshould submit any other projectsactivities undertaken by him/her, which are unrelated to the Company, to the Board for discussion.
The establishment of sub-committees can improve working practices regarding issues that the Board must deal with and can make its work more effective. This is particularly the case for affairs concerning financial supervision and remuneration of the CEO and day-to-day managers.
Sub-committees are appointed to address, in greater detail, specific matters falling within the Board’s role and responsibilities. They prepare matters for the Board, serve in an advisory capacity and support the Board in its oversight of the Company’s operations. The appointment of Sub-committees may also contribute to more focused and effective Board work.
Comment: The establishment of subSub-committees can increase efficiency and improve procedure of Boards, especially in larger companies where the purview of the Board is extensive. Such arrangements make it possible to devote more time and dig deeper into issues concerning financial supervision, risk factors and remuneration. When one or more Board members are not independent of the Company or if employees of the Company serve on the Board, they are less suitable to address matters of financial supervision, risk assessment and (own) remuneration, in which case the appointment of an Audit Committee or Remuneration Committee may be appropriate.
As with other provisions of these Guidelines, the Company‘s Board may reach the conclusion that the appointment of subSub-committees may not necessarily be of such as nature as to increase the quality of management activitiesthe Board‘s work and explain such conclusion in the Corporate Governance Statement (cf. the “comply andor explain” principle).
5.1.1The Board is responsible for the appointment and activities of subSub-committees and they operate under its authority. The establishment of a subSub-committee does not reduce the responsibilities of the Board or relieve it of any liability. All Board members shallshould have an overview of the matters delegated to subSub-committees and be aware of the fact that decision-making powers remain with the entire Board.
5.1.2The role and main projectstasks of subSub-committees shallshould be stipulated in their rules of procedure, which shallshould be posted to the Company’s website. The rules of procedure shallshould state that new committee members should receive instruction and information on the work and procedures of the committee.
5.1.3Sub-committees shallshould annually evaluate their own work and that of individual committee members under a pre-determined arrangement.
5.2.1Sub-committees shallshould ensure that Directors regularly receive accurate information on the main projectsactivities of the committee.
5.2.2Sub-committees shallshould at least annually submit to the Board a report on their projectsactivities.
5.2.3Information and documents from the subSub-committees shallshould be available to Board members well in good time beforeadvance to Board meetings, as well as between meetings, and all Board members should receive the same information. Moreover, information shallshould be available when needed and as accurate as possible.
5.2.4The Board shallshould decide upon a procedure for information provision from the subSub-committees in its operating rules of procedure, e.g. whether the Board should have access to the minutes of subSub-committees’ meetings.
5.3.1Public-interest entities shall havemust, according to law, operate an Audit Committee. MoreoverFor other companies, the appointment of an Audit Committee is recommended if the scope of a giventhe company is such that it is considered important for surveillanceoversight and reporting on financial affairsreporting to receive further discussion and analysis in smaller groups than the entire Board. In addition, there may be a greater need for the appointment of an Audit Committee if one or more Board members cannot be regarded as independent of the Company.
5.3.2For the execution of its work, the Audit Committee shallshould have extensive access to data from managersDay-to-day Management and internal and external auditors. The Committee may request reports and commentaries from such parties as relate to the Committee’s work.
5.3.3The Audit Committee shallshould be established no later than one month after the AGM and shallshould consist of at least three members. In companies other than public-interest entities, the committee may be composed of two members, but in that case both of them need to be independent of the Company.
5.3.4Committee members shallshould be independent from the auditor(s) of the Company. A majority of members shallshould be independent of the Company and its dayDay-to-day managementManagement. Furthermore, one member, who is independent of the dayDay-to-day managementManagement and the Company, shallshould also be independent of major shareholders.Major Shareholders. The CEO and other dayDay-to-day managers mayManagement should not be members of the Committee.
Comment: It is not necessary to appoint members from outside the Board to the Audit Committee, unless it is lacking sufficient expertise.
5.3.5Committee members shallshould have qualifications and experience in accordance with the activities of the Committee, and at least one member shallshould have detailed expertisestrong knowledge and experience in the field of accounting orfinancial reporting and auditing.
Comment: When assessing whether or not a Committee member has such knowledge, the following criteria may be used:
Knowledge of generally accepted accounting principles.
Experience in the preparation and analysis of financial statements and auditing
Knowledge of internal controls relating to accountingover financial reporting.
5.3.6The Audit Committee shall review allreviews financial information and procedures regarding informationthe arrangements for disclosure from dayby Day-to-day managers andManagement, internal audit and external accountantsauditors. The Committee shall verify that the information thatshould also assess whether disclosure to the Board receives regarding the operations, standing and future prospects of the Company are and stakeholders is reliable and giveappropriate and gives the clearest possible perspective of the Company at any given timeview of the Company’s operations, financial position and prospects.
5.3.7The Audit Committee shallshould annually scheduletake the initiative in convening a joint meeting of the Board, the Committee and the external auditors, where the dayDay-to-day managementManagement of the Company is not present.
5.3.8The role and main projectstasks of the Committee shallshould be set out in its rules of procedure. The Audit Committee shallshould, among other things, have the following roles irrespective of the responsibility of the Board, managersDay-to-day Management or others in this field:
Monitoring working processes in the preparation of financial statements.
Monitoring the organisation and effectiveness of the Company’s internal controls, internal auditing, if applicable, and risk management.
Monitoring and checking the auditing of the Company’s annual accounts and consolidated accounts.
Assessing the independence of external auditors or auditing firm and monitoring any other work performed by the external auditors or auditing firm. The Committee shallshould in its assessment take into consideration the items specified in SectionSections 2.3 and 2.4.
Presenting proposals to the Board regarding the selection of external auditors or auditing firm.
Comment: Other tasks undertaken by the Committee may be as follows, if appropriate:
Assessing financial statements and management reports on the Company’s finances.
Monitoring risk management and responses to risks.
Following up on remedies to shortcomings identified duringin internal controls.
Assessing the need for and handling the recruitment of an internal auditor.
Handling communication and monitoring in respect of internal auditing and external auditors.
Assessing the work of both internal and external auditors of the Company.
5.3.9Detailed provisions on the execution of the roles of the Audit Committee shallshould be included in its rules of procedure.
5.4.1The Board shallshould appoint a Remuneration Committee to prepare a draft remuneration policy for the Company, in accordance with that set out in Section 2.79, and to negotiate with the CEO and other employees, if they are Board members, on wages and other employment terms.
Comment: The establishment of a Remuneration Committee is particularly recommended if the CEO is also a Director of the Board or if, other Directors are also employees of the Company and, one or more Board members cannot be said to be independentsindependent or if the CEO is not independent of major shareholdersMajor Shareholders in the Company.
5.4.2The Remuneration Committee shallshould consist of at least three members, the majority of whom shallshould be independent of the Company and its dayDay-to-day managementManagement. However, the Committee may consist of two members, in which case both members shallshould be independent of the Company.
5.4.3Owing to the nature of the activities of the Remuneration Committee, neither the CEO nor other employees mayshould be members of the Committee. If the Board finds it more suitable to undertake the role of the Remuneration Committee itself, the Directors of the Board who are also employees of the Company mayshould not be involved in such work.
5.4.4The role and main tasks of the Remuneration Committee shallshould be stated in its rules of procedure and shallshould take account of the needs of the Company.
5.4.5The role of the Committee shallshould include:
preparing the Company’s remuneration policy and ensuring thatmonitoring compliance with it is enforced;
ensuring that wages and other employment terms are in accordance with laws, regulations and best practices as current at any given time;
preparing the decisions of the Board concerning the wages and other employment terms of dayDay-to-day managementManagement and employees who also are Board members;
taking an independent stance on the effect of wages on the Company’s risk exposure-taking and risk management, in cooperation with the Company’s Audit Committee.
5.4.6The Remuneration Committee may seek the involvement of expert consultants in the execution of its duties. Such consultants shallshould be independent of the Company, and its dayDay-to-day managersManagement. The Committee is responsible for verifying that such consultants are independent.
Publishing information on corporate governance increases transparency of governance towards shareholders and other stakeholders. Publishing such information therefore helps increase thestrengthens market discipline and enhances corporate credibility of companies.. For the purpose of encouraging improvements and increasing transparency, the best policyit is exemplary to provide information on the effects of the Company on the community and environment. Certain companies are under obligation, by law, to publish non-financial information in their Annual Accounts.
6.1.1A statement on the Company’s governance for the preceding year shallshould be published annually in a separate chapter in its annual accounts or annual report. The corporate governance statement shallshould be accessible on the Company’s website.
6.1.2The statement shallshould contain the following items:
References to the rules on corporate governance that the Company follows, or is obligedrequired by law to follow, and where such rules can be accessed by the public.
Whether the Company departsdeviates from any part of the relevant guidelinesthese Guidelines and if so, which ones. The reasons for departure shallshould be indicated and whether there is reason to take action to mitigate deviations... If the deviation is temporary, such temporary deviation mustshould be mentioned specifically.
References to any other rules or guidelines on corporate governance that have been followed and specifically apply to the type of business the Company is involved in.
6.1.4A description of the main aspects of internal control and the Company’s risk management.
A description of the Company‘s policy on diversity in connection with the Board of Directors, executive management and senior management. If no such policy is followed, the reason for this must be stated in the report.
Description of the composition and activities of the Board, management and subSub-committees of the Board.
Arrangements for the appointment of Nomination Committee members.
Arrangements for the appointment of subSub-committee members.
Information on the number of Board meetings and subSub-committee meetings as well as their attendance.
Where written rules of procedure for the Board and its subSub-committees may be accessed.
Information on Directors of the Board (see Section 2.3.65.2).
Information on which Directors are independent of the Companyompany and major shareholders.Day-to Day management (see Section 2.3) and which Directors are independent of Major Shareholders (see Section 2.4).
Principal aspects of the Board’s performance assessment.
Information on the Company’s CEO (see Section 4.1.1) and a description of his/her main duties.
Information on infringements of laws and regulations that the appropriate supervisory or ruling body has determined during the preceding operating year.
Arrangements for communications between shareholders and the Board.
6.1.3The above shallshould apply equally to the consolidated financial statements.
The Board shallshould review the Company’s corporate governance statement and the Company’s auditor shallshould ensure that it is included in the annual accounts/annual report and that its description of the main features of internal controls and risk management is in accordance with the Company’s financial statements.
Comment: Information on the effects of companies on communities and the environment (also referred to as “„non-financial information”) plays an ever more important role as regards credibility toward shareholders, customers, employees and other stakeholders. As a result, it sets a good example to examine and publish information on such aspects, and certain companies are under obligation to do so according to law.
6.2.1Every year, companies are toshould publish, together with the report ofin a statement accompanying the Board of DirectorsDirectors’ report and on their website, the non-financial information necessary to make an assessment on the development, scope, position and effect on the Company. At a bare minimum, aThe discussion must be included ofshould address the Company’s policies onsustainability policy, cf. Section 2.11.1, and should at least cover the following issuesmatters:
Environmental issuesmatters
Human resources issuesSocial matters
Employee matters
Human rights issues matters
Corruption and bribery issuesmatters
Comment: Where the Company publishes non-financial information in its annual report, sustainability report or other public documents, the statement accompanying the Board of Directors’ report may refer to that information, provided the presentation is clear and shareholders, investors and other stakeholders can readily identify where the relevant information is located. This applies only to the extent that laws or regulations do not require the information to be presented specifically in the Board of Directors’ report.
6.2.2The discussion on the above-mentioned company policies shallshould address:
The main risk factors in the operation of the Company which are likely to have a detrimental impact in these fields and the manner in which the Company intends to address such risks.
The goals of the Company as relates to these policies, the achievement of the Company in connection with such goals and the due diligence process in such achievement.
6.2.3Companies shallshould also publish, in the overview, information on non-financial criteria other than those relating to the above issues if such information is considered important based on the operation of the Company.
6.3.1The Company shallshould reserve a section of its website for good corporate governance and shallshould publish its corporate governance statement there along with all the main information on the activities of the Company.
6.3.2The Company’s website shallshould include the following information:
The Company’s corporate governance statement.
Non-financial information.
The Company’s remuneration policy.
Summarised information on the Company’s Board of Directors, CEO, auditors and members of subSub-committees.
Information on the Company’s shareholders’ meetingsShareholders’ Meetings, including time and location, information on candidates to the Board, and the agenda of the meeting, together with the date of issue of the annual accounts and interim financial statements.
Meeting notices, minutes of shareholders’ meetingsShareholders’ Meetings and documents presented at the meeting. It is not necessary to publish a list of the shareholders and proxies that have attended meetings.
Information on the arrangements for the appointment of the Nomination Committee, the working proceduresrules of procedure of the Committee and information on the Committee members. Information on Committee members shallshould be published at least six months before the Annual General Meeting.
The Nomination Committee’s justification for its proposal of candidates.
Information on how the Board candidate proposals will be submitted, and how shareholders may propose candidates to the Nomination Committee.
The Company’s Articles of Association.
The Board’s rules of procedure.
The Company’s annual accounts and the report of the Board of Directors.
6.3.3The above-mentioned information shallshould be updated within seven days from the time that the Directors and/or the executive managersDay-to-day Management become aware that the information has changed.