corporate governance 2017/18 - tk-development.dk governance/uk_corporat… · reasons for part...

Corporate Governance 2017/18

TK Development A/S • Vestre Havnepromenade 7 • DK-9000 Aalborg • www.tk-development.dk • CVR no. 24256782

Owner-occupied housing, Beddingen 7A, Østre Havn, Aalborg, Denmark

http://www.tk-development.com/

2

Listed companies are required to report on how they address the “Recommendations for corporate governance”. One of the fundamental principles of these recommendations is the “comply or explain” principle, under which companies must either comply with the corporate governance recommendations or explain why they do not comply with the recommendations in full or in part.

TK Development’s Board of Directors and Executive Board remain focused on corporate governance, and the Board of Directors reconsiders its position on the corporate governance recommendations at least once a year. In a few areas, the Company does not comply with the recommendations, but instead explains its reasons for not complying with a specific recom-mendation. The recommendations are publicly available on the website of the Committee on Corporate Governance, www.corporategovernance.dk. The Board of Directors is of the opinion that the Company complies with the current recommendations on corporate governance.

Recommendation The Com-pany complies

The Com-pany partly complies

The Com-pany does not comply

Reasons for part compliance/non-compliance with the recom-mendation:

1. Communication and interaction by the company with its investors and other stakeholders

1.1. Dialogue between company, shareholders and other stakeholders

1.1.1. The Committee recommends that the board of direc-tors ensure ongoing dialogue between the company and its shareholders in order for the shareholders to gain relevant in-sight into the company’s potential and policies, and in order for the board of directors to be aware of the shareholders’ views, interests and opinions on the company.

The Board of Directors aims to maintain an ongoing dialogue with the Company’s current and potential shareholders. During the year, TK Development holds a number of investor meetings, both at its own initiative and at the request of investors. Immediately after meetings held following the publication of annual and half-yearly reports, the investor presentation material is made availa-ble on the Company’s website. In addition, information is communicated to the shareholders through company announcements, the Company’s website, gen-eral meetings and quarterly and annual reports. In connection with the publication of the Group’s annual and half-yearly reports, special shareholder information, “TK Nyt” (TK News), is published on the Company’s website. The Board of Directors regularly assesses whether new infor-mation technology can be employed in the provision of infor-mation to the Company’s shareholders. For instance, the possibil-ities of conducting partly electronic or webcasting general meet-ings have been explored, but these options have so far been found irrelevant.

3





1.1.2. The Committee recommends that the board of direc-tors adopt policies on the company’s relationship with its stakeholders, including shareholders and other investors, and that the board ensure that the interests of the shareholders are respected in accordance with company policies.

The Board of Directors has adopted an IR policy, which is disclosed on the Company’s website. The Board of Directors has also adopted a tax policy. The Board of Directors assesses corporate policies on an ongoing basis to ensure they are aligned with stake-holders’ needs.

1.1.3. The Committee recommends that the company publish quarterly reports.

The Board of Directors wishes to maintain a high level of infor-mation, openness and transparency vis-à-vis the Company’s share-holders and other stakeholders and, accordingly, publishes quar-terly reports.

1.2. General meeting

1.2.1. The Committee recommends that when organising the company’s general meeting, the board of directors plan the meeting to support active ownership.

The Board of Directors is committed to ensuring that the general meeting of shareholders is a forum for open communication and exchange of opinions between shareholders and the Board of Di-rectors, and urges shareholders to participate in the debate at the general meeting. All registered shareholders are entitled to vote at general meetings. Shareholders holding at least 5% of the Company’s share capital may convene an extraordinary general meeting.

1.2.2. The Committee recommends that proxies granted for the general meeting allow shareholders to consider each indi-vidual item on the agenda.

The notice convening the general meeting through the Company’s website is accompanied by an authorisation form for appointing a proxy. The authorisation form allows shareholders unable to at-tend the general meeting to consider each individual item on the agenda. It is also possible to vote by correspondence.

1.3. Takeover bids

1.3.1. The Committee recommends that the company set up contingency procedures in the event of takeover bids from the time that the board of directors has reason to believe that a takeover bid will be made. According to such contingency pro-cedures, the board of directors should not without the ac-

The Board of Directors has adopted contingency procedures in ac-cordance with the recommendations.

4





ceptance of the general meeting attempt to counter the take-over bid by making decisions which in reality prevent the shareholders from deciding on the takeover bid themselves.

2. Tasks and responsibilities of the board of directors

2.1. Overall tasks and responsibilities

2.1.1. The Committee recommends that at least once a year the board of directors take a position on the matters related to the board’s performance of its responsibilities.

The Board of Directors performs its duties according to an annual wheel and the Board’s rules of procedure. The Board of Directors reviews the annual wheel and the rules of procedure once a year and makes any necessary adjustments.

2.1.2. The Committee recommends that at least once a year the board of directors take a position on the overall strategy of the company with a view to ensuring value creation in the company.

The Board of Directors reviews the Company’s overall strategy at least once a year and holds annual strategic board meetings.

2.1.3. The Committee recommends that the board of direc-tors ensure that the company has a capital and share structure ensuring that the strategy and long-term value creation of the company are in the best interest of the shareholders and the company, and that the board of directors present this in the management commentary on the company’s annual report and/or on the company’s website.

The Board of Directors reviews the Company’s capital and share structure on an ongoing basis to determine whether it is in accord with the Company’s and the shareholders’ interests and reports on its assessment in the annual report.

2.1.4. The Committee recommends that the board of direc-tors annually review and approve guidelines for the executive board; this includes establishing requirements for the execu-tive board on timely, accurate and adequate reporting to the board of directors.

The rules of procedure of the Board of Directors also set out the rules of procedure of the Executive Board, which are discussed and adjusted if necessary at least once a year together with the rules of procedure of the Board of Directors. The rules of procedure set out requirements for reporting from the Executive Board to the Board of Directors, and for other communication between the two boards.

2.1.5. The Committee recommends that at least once a year the board of directors discuss the composition of the execu-tive board, as well as developments, risks and succession plans.

The Board of Directors conducts this discussion in connection with its annual evaluation of the Executive Board’s work and achieve-ments.

5





2.1.6. The Committee recommends that once a year the board of directors discuss the company’s activities to ensure rele-vant diversity at management levels, including setting specific goals and accounting for its objectives and progress made in achieving the objectives in the management commentary on the company’s annual report and/or on the website of the company.

The Board of Directors has adopted a policy to ensure diversity on the Board of Directors. In addition, the Board of Directors has adopted a policy for the under-represented gender at executive levels below the Executive Board. The Group reports on its pro-gress within these areas on its website.

2.2. Corporate social responsibility

2.2.1. The Committee recommends that the board of direc-tors adopt policies on corporate social responsibility.

In light of the Company’s size and activities and the markets in which the Group operates, the Board of Directors has opted not to adopt policies for corporate social responsibility. The Board of Di-rectors regularly assesses the need to adopt policies for this area.

2.3. Chairman and vice-chairman of the board of directors

2.3.1. The Committee recommends appointing a vice-chair-man of the board of directors who will assume the responsi-bilities of the chairman in the event of the chairman’s ab-sence, and who will also act as an effective sparring partner for the chairman.

The Board of Directors elects a Chairman and a Deputy Chairman from among its members. In the Chairman’s absence, the Deputy Chairman takes his/her seat. The Deputy Chairman also acts as an effective sparring partner for the Chairman.

2.3.2. The Committee recommends ensuring that, if the board of directors, in exceptional cases, asks the chairman of the board of directors to perform special operating activities for the company, including briefly participating in the day-to-day management, a board resolution to that effect be passed to ensure that the board of directors maintains its independent, overall management and control function. Resolutions on the chairman’s participation in day-to-day management and the expected duration hereof should be published in a company announcement.

The Chairman of the Board of Directors does not take part in the day-to-day management of the Company.

3. Composition and organisation of the board of directors

3.1. Composition

6





3.1.1. The Committee recommends that the board of direc-tors annually account for • the skills it must have to best perform its tasks; • the composition of the board of directors, and • the special skills of each member.

The Board of Directors annually considers the skills it must have to best perform its tasks, as well as the composition of the Board of Directors for this purpose. The skills are specified on the Com-pany’s website. Information on the composition of the Board of Directors and the special qualifications of each member is dis-closed in the Group’s annual report.

3.1.2. The Committee recommends that the selection and nomination of candidates for the board of directors be carried out through a thoroughly transparent process approved by the overall board of directors. When assessing its composition and nominating new candidates, the board of directors must take into consideration the need for integration of new talent and diversity in relation to age, international experience and gender.

Annual assessments are made to determine whether the compo-sition of the Board of Directors is optimal. This includes consider-ing each board member’s professional qualifications and experi-ence and the need to introduce new talent, as well as the need for continuity and diversity, including international experience, age and gender. All members of the Board of Directors take part in this assessment and may nominate new candidates.

3.1.3. The Committee recommends that the notice convening the general meeting when election of members to the board of directors is on the agenda be accompanied by a description of the nominated candidates’ qualifications, including infor-mation about the candidates’ • other executive functions, among these memberships in ex-ecutive boards, boards of directors and supervisory boards, in-cluding board committees, in foreign enterprises; • demanding organisational tasks; and information about • whether candidates to the board of directors are considered independent.

The qualifications of each member of the Board of Directors, exec-utive positions held by them in both Danish and foreign companies as well as any demanding organisational tasks and members’ inde-pendence are disclosed in the annual report. Notices convening general meetings refer to the profiles of existing members of the Board of Directors in the annual report, and include a description of any new candidates’ background and qualifications, their mem-berships of executive boards and boards of directors in other Dan-ish and foreign companies and any demanding organisational tasks. Also included is an assessment of their independence. Infor-mation on the elected members of the Board of Directors is avail-able on the Company’s website. Where new candidates are nominated, the management com-mentary describes the criteria used by the Board of Directors in selecting new candidates, including required professional qualifi-cations, experience and educational background, in order to en-sure an optimal composition of the Board of Directors.

3.1.4. The Committee recommends that the company’s arti-cles of association stipulate a retirement age for members of the board of directors.

Attaching greater importance to qualifications than to age, TK De-velopment has not fixed an age of retirement for the members of the Board of Directors. This recommendation is not included in the

7





corporate governance recommendations effective for financial years starting on or after 1 January 2018.

3.1.5. The Committee recommends that members of the board of directors elected by the general meeting be up for election every year at the annual general meeting.

Board members are elected at the general meeting for terms of one year. Members of the Board of Directors are eligible for re-election. While there are no restrictions on the number of times a member of the Board of Directors may be re-elected, the Board seeks to maintain an appropriate balance between renewal and continuity.

3.2. Independence of the board of directors

3.2.1. The Committee recommends that at least half of the members of the board of directors elected by the general meeting be independent persons, in order for the board of di-rectors to be able to act independently of special interests. To be considered independent, this person may not: • be or within the past five years have been a member of the

executive board, or a senior staff member in the company, a subsidiary undertaking or an associate;

• within the past five years have received substantial emolu-ments from the company/group, a subsidiary undertaking or an associate in another capacity than as a member of the board of directors;

• represent the interests of a controlling shareholder; • within the past year have had significant business relations

(e.g. personal or indirectly as partner or employee, share-holder, customer, supplier or member of the executive management in companies with corresponding connection) with the company, a subsidiary undertaking or an associate;

• be or within the past three years have been employed or a partner with the external auditor;

• have been chief executive in a company holding cross-mem-berships with the company;

• have been a member of the board of directors for more than 12 years, or

The Board of Directors considers all its members to be independ-ent of the Company.

8





• have been close relatives with persons who are not consid-ered independent.

3.3. Members of the board of directors and the number of other executive functions

3.3.1. The Committee recommends that each member of the board of directors assess the expected time commitment for each function in order that the member does not take on more functions than he/she can manage satisfactorily for the company.

Each member of the Board of Directors estimates the time com-mitment required for each function and takes on no more duties than he/she can satisfactorily manage for TK Development.

3.3.2. The Committee recommends that the management commentary, in addition to the provisions laid down by legis-lation, include the following information about the members of the board of directors: • the position of the relevant person; • the age and gender of the relevant person; • whether the member is considered independent; • the date of appointment to the board of directors of the

member; • expiry of the current election period; • other executive functions, e.g. memberships in executive

boards, boards of directors and supervisory boards, includ-ing board committees, in foreign enterprises;

• demanding organisational tasks, and • the number of shares, options, warrants, etc. in the com-

pany and other group companies of the company owned by the member, as well as changes in the member's portfolio of the securities mentioned which have occurred during the financial year.

The “Board of Directors” section in the Group’s annual report dis-closes the information recommended regarding the individual members of the Board of Directors, except for information about the number of shares and warrants in the Company held by mem-bers of the Executive Board and the Board of Directors, as well as any changes in such holdings during the financial year, which is in-cluded in the “Shareholder information” section.

3.4. Board committees

3.4.1. The Committee recommends that the company publish the following on the company’s website: • the terms of reference of the board committees;

This information is disclosed on the Company’s website.

9





• the most important activities of the committees during the year and the number of meetings held by each committee, and

• the names of the members of each committee, including the chairmen of the committees, as well as information on which members are independent members and which members have special qualifications.

3.4.2. The Committee recommends that a majority of the members of a board committee be independent.

All members of the board committees, which are composed exclu-sively of members of the Company’s Board of Directors, are inde-pendent.

3.4.3. The Committee recommends that the board of direc-tors set up a formal audit committee composed such that • the chairman of the board of directors is not chairman of

the audit committee, and • between them, the members should possess such expertise

and experience as to provide an updated insight into and experience in the financial, accounting and audit aspects of companies whose shares are admitted to trading on a regu-lated market.

The Board of Directors has set up a formal audit committee. The composition of the audit committee is in accordance with the rec-ommendations.

3.4.4. The Committee recommends that, prior to the approval of the annual report and other financial reports, the audit committee monitors and reports to the board of directors about: • significant accounting policies; • significant accounting estimates; • related party transactions, and • uncertainties and risks, including in relation to the outlook

for the current year.

Prior to approval of the annual report and other financial reports, the audit committee considers subjects such as significant ac-counting policies, significant accounting estimates and judgments, related party transactions and uncertainties and risks. The exter-nal auditors take part in these discussions every year prior to ap-proval of the annual report.

3.4.5. The Committee recommends that the audit committee: • annually assess the need for an internal audit, and in such

case make recommendations on selecting, appointing and removing the head of the internal audit function and on the budget of the internal audit function, and

• monitor the executive board's follow-up on the conclusions and recommendations of the internal audit function.

Based on the Company’s size, complexity and accounting depart-ment organisation, the audit committee considers an internal au-dit function to be currently unnecessary. The need for an internal audit function is reassessed annually.

10





3.4.6. The Committee recommends that the board of direc-tors establish a nomination committee chaired by the chair-man of the board of directors with at least the following pre-paratory tasks: • describe the qualifications required by the board of direc-

tors and the executive board and for a specific membership, state the time expected to be spent on having to carry out the membership, as well as assess the competences, knowledge and experience of the two governing bodies combined;

• annually assess the structure, size, composition and results of the board of directors and the executive board, as well as recommend any changes to the board of directors;

• annually assess the competences, knowledge and experi-ence of the individual members of management and report to the board of directors in this respect;

• consider proposals from relevant persons, including share-holders and members of the board of directors and the ex-ecutive board, for candidates for the board of directors and the executive board, and

• propose an action plan to the board of directors on the fu-ture composition of the board of directors, including pro-posals for specific changes.

The Board of Directors has set up a nomination committee. The duties of the nomination committee are in accordance with the recommendations.

3.4.7. The Committee recommends that the board of direc-tors establish a remuneration committee with at least the fol-lowing preparatory tasks: • recommend the remuneration policy (including the general

guidelines for incentive-based remuneration) to the board of directors and the executive board for approval by the board of directors prior to approval by the general meeting;

• make proposals to the board of directors on remuneration for members of the board of directors and the executive board, as well as ensure that the remuneration is in compli-ance with the company’s remuneration policy and the as-sessment of the performance of the persons concerned. The committee should have information about the total amount

The Board of Directors has set up a remuneration committee. The duties of the remuneration committee are in accordance with the recommendations.

11





of remuneration that members of the board of directors and the executive board receive from other companies in the group, and

• recommend a remuneration policy applicable for the com-pany in general.

3.4.8. The Committee recommends that the remuneration committee should not consult with the same external advisers as the executive board of the company.

The remuneration committee and the Executive Board do not con-sult with the same external advisers.

3.5. Evaluation of the performance of the board of directors and the executive board

3.5.1. The Committee recommends that the board of direc-tors establish an evaluation procedure where contributions and results of the board of directors and the individual mem-bers as well as collaboration with the executive board are an-nually evaluated. Significant changes deriving from the evalu-ation should be included in the management commentary or on the company’s website.

Once a year, the Board of Directors systematically evaluates its work and qualifications with a view to continuously improving the quality and efficiency of its work. The Chairman is in charge of this internal evaluation. Details on any significant changes deriving from the evaluation are disclosed in TK Development’s annual re-port.

3.5.2. The Committee recommends that in connection with preparation of the general meeting the board of directors con-sider whether the number of members is appropriate in rela-tion to the requirements of the company. This should help en-sure a constructive debate and an effective decision-making process in which all members are given the opportunity to participate actively.

Once a year, in preparing the annual general meeting, the Board of Directors considers whether the number of members on the Board of Directors is appropriate in light of the Company’s needs. The Board of Directors is currently composed of five members, which the Board of Directors considers appropriate for purposes of ensuring continuity, a constructive dialogue and an efficient de-cision-making process enabling all members to play an active role.

3.5.3. The Committee recommends that at least once every year the board of directors evaluate the work and perfor-mance of the executive board in accordance with pre-defined clear criteria.

At least once a year, the Board of Directors evaluates the Executive Board’s work and qualifications, including communication and col-laboration. This includes evaluating the results achieved compared to targets set, and addressing the need to change work processes.

3.5.4. The Committee recommends that the executive board and the board of directors establish a procedure according to which their cooperation is evaluated annually through a for-malised dialogue between the chairman of the board of direc-tors and the chief executive officer and that the outcome of the evaluation be presented to the board of directors.

At least once a year, the Chairman of the Board of Directors and each Executive Board member discuss and evaluate the efforts of both Boards and their cooperation in the past year. The outcome of this discussion is presented to the full Board of Directors.

12





4. Remuneration of management

4.1. Form and content of the remuneration policy

4.1.1. The Committee recommends that the board of direc-tors prepare a clear and transparent remuneration policy for the board of directors and the executive board, including • a detailed description of the components of the remunera-

tion for members of the board of directors and the execu-tive board;

• the reasons for choosing the individual components of the remuneration, and

• a description of the criteria on which the balance between the individual components of the remuneration is based.

The remuneration policy should be approved by the general meeting and published on the company’s website.

The Group’s remuneration policy is clear and transparent and in-cludes the information recommended. The remuneration policy, adopted at the Company’s annual gen-eral meeting in 2011, is disclosed on the Company’s website, www.tk-development.com. Any changes to the remuneration policy are subject to approval by the general meeting.

4.1.2. The Committee recommends that, if the remuneration policy includes variable components, • limits be set on the variable components of the total remu-

neration package; • a reasonable and balanced linkage be ensured between re-

muneration for governing body members, expected risks and the value creation for shareholders in the short and long term;

• there be clarity about performance criteria and measurabil-ity for award of variable components;

• there be criteria ensuring that qualifying periods for variable components in remuneration agreements are longer than one calendar year, and

• an agreement be made which, in exceptional cases, entitles the company to reclaim in full or in part variable compo-nents of remuneration that were paid on the basis of data which proved to be misstated.

The remuneration policy for the Board of Directors and the Execu-tive Board adopted by the general meeting contains variable com-ponents as regards the Company’s Executive Board. In the opinion of the Board of Directors, the remuneration policy appropriately balances remuneration, foreseeable risks and long- and short-term creation of shareholder value. Once a year, the Board of Di-rectors compares the remuneration paid to the Executive Board to that of executive boards of comparable companies with interna-tional activities. The performance criteria and measurability for award of variable remuneration components are clear. For the time being, the Board of Directors has decided not to set limits for the portion of the total pay package that may be ac-counted for by variable pay components as bonuses will only be paid if the return on equity is at least 8%. For the time being, bo-nuses are expected to account for a minor portion relative to fixed

http://www.tk-development.com/

13





pay components. As bonus is paid only if the return on equity for a financial year is at least 8%, the Board of Directors believes that the interests of the Executive Board and the shareholders are continually aligned. The Board has therefore not found it necessary to lay down criteria ensuring that qualifying periods for variable pay components are longer than one financial year.

4.1.3. The Committee recommends that remuneration of members of the board of directors should not include share options.

The members of the Board of Directors only receive a fixed remu-neration and are not included in incentive or bonus programmes.

4.1.4. The Committee recommends that if share-based remu-neration is provided, such programmes be established as roll-over programmes, i.e. the options are granted periodically and should have a maturity of at least three years from the date of allocation.

TK Development has not offered incentive programmes since 2011.

4.1.5. The Committee recommends that agreements on ter-mination payments should not amount to more than two years’ annual remuneration.

TK Development has not entered and does not intend to enter into agreements on termination payments amounting to more than two years’ annual remuneration.

4.2. Disclosure of the remuneration policy

4.2.1. The Committee recommends that the company’s remu-neration policy and compliance with this policy be explained and justified annually in the chairman’s statement at the com-pany’s general meeting.

TK Development’s remuneration policy is outlined at its annual general meeting, and compliance with the policy is explained and justified in the Chairman’s statement.

4.2.2. The Committee recommends that the proposed remu-neration for the board of directors for the current financial year be approved by the shareholders at the general meeting.

Remuneration for the Board of Directors for the current financial year is adopted every year at the Company’s annual general meet-ing.

4.2.3. The Committee recommends that the total remunera-tion granted to each member of the board of directors and the executive board by the company and other companies in the group, including information on the most important contents of retention and retirement/resignation schemes, be dis-closed in the annual report and that the linkage with the re-muneration policy be explained.

The annual report provides information on the remuneration paid by the Company and the Group as a whole to each member of the Board of Directors and the Executive Board. The annual report also discloses information on the Executive Board’s retention and re-tirement/resignation schemes, and explains the linkage with the remuneration policy adopted.

14





5. Financial reporting, risk management and audits

5.1. Identification of risks and transparency about other relevant information

5.1.1. The Committee recommends that the board of direc-tors in the management commentary review and account for the most important strategic and business-related risks, risks in connection with the financial reporting as well as for the company’s risk management.

Once a year, the Board of Directors considers the Company’s most important strategic and business-related risks and the manage-ment of such risks, as well as its financial reporting risks. In addi-tion, the Board of Directors continuously assesses specific risks re-lated to the Group’s individual projects. The information recom-mended is included in the Company’s annual report.

5.2. Whistleblower scheme

5.2.1. The Committee recommends that the board of direc-tors decide whether to establish a whistleblower scheme for expedient and confidential notification of possible or sus-pected wrongdoing.

In the opinion of the Board of Directors, there is currently no need to establish a whistleblower scheme.

5.3. Contact to auditor

5.3.1. The Committee recommends that the board of direc-tors ensure regular dialogue and exchange of information be-tween the auditor and the board of directors, including that the board of directors and the audit committee at least once a year meet with the auditor without the executive board pre-sent. This also applies to the internal auditor, if any.

The Board of Directors maintains a regular dialogue with the ex-ternal auditors. The auditors attend audit committee and board meetings to the extent this is considered relevant, and are always present at audit committee and board meetings held for purposes of approving the Company’s financial statements. The Board of Di-rectors and the external auditors met once without the Executive Board being present in 2017/18.

5.3.2. The Committee recommends that the audit agreement and auditors’ fee be agreed between the board of directors and the auditor on the basis of a recommendation from the audit committee.

Once a year, in consultation with the Executive Board and the au-dit committee, the Board of Directors performs a specific, critical assessment of the independence, qualifications, etc. of the audi-tors for purposes of its recommendation to the general meeting on the appointment of auditors. An audit agreement is concluded each year between the Board of Directors and the auditors regard-ing the overall framework for the audit work and audit fees.

corporate governance 2017/18 - tk-development.dk governance/uk_corporat… · reasons for part...

Documents