Sub-committees of the Board

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.

The establishment of sub-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.

Establishment and operations of sub-committees

  1. The Board is responsible for the appointment and activities of sub-committees and they operate under its authority. The establishment of a sub-committee does not reduce the responsibilities of the Board or relieve it of any liability. All Board members shall have an overview of the matters delegated to sub-committees and be aware of the fact that decision-making powers remain with the entire Board.
  2. The role and main projects of sub-committees shall be stipulated in their rules of procedure, which shall be posted to the Company’s website. The rules of procedure shall state that new committee members should receive instruction and information on the work and procedures of the committee.
  3. Sub-committees shall annually evaluate their own work and that of individual committee members under a pre-determined arrangement.

Information obligation of sub-committees

  1. Sub-committees shall ensure that Directors regularly receive accurate information on the main projects of the committee.
  2. Sub-committees shall at least annually submit to the Board a report on their projects.
  3. Information and documents from the sub-committees shall be available to Board members in good time before Board meetings, as well as between meetings, and all Board members should receive the same information. Moreover, information shall be available when needed and as accurate as possible.
  4. The Board shall decide upon a procedure for information provision from the sub-committees in its operating rules, e.g. whether the Board should have access to the minutes of sub-committees’ meetings.

Audit Committee

  1. Public-interest entities shall have an Audit Committee. Moreover, the appointment of an Audit Committee is recommended if the scope of a given company is such that it is considered important for surveillance and reporting on financial affairs to receive further discussion and analysis in smaller groups than the entire Board.
  2. For the execution of its work, the Audit Committee shall have extensive access to data from managers and internal and external auditors. The Committee may request reports and commentaries from such parties as relate to the Committee’s work.

    Appointment of Committee Members

  3. The Audit Committee shall be established no later than one month after the AGM and shall 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.
  4. Committee members shall be independent from the auditor(s) of the Company. A majority of members shall be independent of the Company and its day-to-day management. Furthermore, one member, who is independent of the day-to-day management and the Company, shall also be independent of major shareholders. The CEO and other day-to-day managers may not be members of the Committee.

    It is not necessary to appoint members from outside the Board to the Audit Committee, unless it is lacking sufficient expertise.

  5. Committee members shall have qualifications and experience in accordance with the activities of the Committee, and at least one member shall have detailed expertise in the field of accounting or auditing.

    When assessing whether or not a Committee member has such knowledge, the following criteria may be used:
    1. Knowledge of generally accepted accounting principles.
    2. Experience in the preparation and analysis of financial statements and auditing
    3. Knowledge of internal controls relating to accounting.

    Role of the Audit Committee

  6. The Audit Committee shall review all financial information and procedures regarding information disclosure from day-to-day managers and internal and external accountants. The Committee shall verify that the information that the Board receives regarding the operations, standing and future prospects of the Company are reliable and give the clearest possible perspective of the Company at any given time.
  7. The Audit Committee shall annually schedule a joint meeting of the Board, the Committee and the external auditors, where the day-to-day management of the Company is not present.
  8. The role and main projects of the Committee shall be set out in its rules of procedure. The Audit Committee shall, among other things, have the following rolesCf. Article 108B of the Annual Accounts Act. irrespective of the responsibility of the Board, managers 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 shall in its assessment take into consideration the items specified in Section 2.3.
    • Presenting proposals to the Board regarding the selection of external auditors or auditing firm.

      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 during 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.

  9. Detailed provisions on the execution of the roles of the Audit Committee shall be included in its rules of procedure.

Remuneration Committee

  1. The Board shall appoint a Remuneration Committee to establish a remuneration policy for the Company, in accordance with that set out in Section 2.7, and to negotiate with the CEO and other employees, if they are Board members, on wages and other employment terms.Pursuant to Article 79A(1) of the PUBLC Act and Article 54A(1) of the PRILC, Boards of companies that have an obligation to vote for an Auditor under to the Annual Accounts Act shall approve the Company’s remuneration policy.

    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 or if the CEO is not independent of major shareholders in the Company.

    Appointment of Committee Members

  2. The Remuneration Committee shall consist of at least three members, the majority of whom shall be independent of the Company and its day-to-day management. However, the Committee may consist of two members, in which case both members shall be independent of the Company.See further on the independence of Board members in Section 2.3.
  3. Owing to the nature of the activities of the Remuneration Committee, neither the CEO nor other employees may 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 may not be involved in such work.

    Role of the Remuneration Committee

  4. The role and main tasks of the Remuneration Committee shall be stated in its rules of procedure and shall take account of the needs of the Company.
  5. The role of the Committee shall include:
    • preparing the Company’s remuneration policy and ensuring that 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 day-to-day management and employees who also are Board members;
    • taking an independent stance on the effect of wages on the Company’s risk exposure and risk management, in cooperation with the Company’s Audit Committee.
  6. The Remuneration Committee may seek the involvement of expert consultants in the execution of its duties. Such consultants shall be independent of the Company, its day-to-day managers. The Committee is responsible for verifying that such consultants are independent.