From the annual report 2007:
Corporate Governance: Statement for 2007
STX Europe's corporate governance policy is adopted by the Board of Directors of STX Europe AS. The following presents STX Europe's practices regarding each of the recommendations contained in the Norwegian Code of Practice for Corporate Governance dated December 2007.
1. Corporate governance - presentation
STX Europe's corporate governance policy was adopted by the Board of Directors in 2004 and most recently revised in March 2008. STX Europe' corporate governance policy is available at www.akeryards.com and is included on page 37 of the Board of Directors' report.
The following is the Board's presentation of STX Europe' corporate governance practices regarding each of the recommendations contained in the Norwegian Code of Practice for Corporate Governance dated 4 December 2007 (hereafter: the Code of Practice). Any deviations from the recommendations are discussed under the applicable section.
The Board has approved and adopted STX Europe' corporate values and ethical guidelines. STX Europe' corporate values are presented on pages 8 and 9 of the annual report. The ethical guidelines have been prepared in accordance with the corporate values.
STX Europe' business clause is as follows:
The company's purpose is owning and/or operating industrial and other, related activities, including those associated with shipbuilding, capital management and other group functions, and participating in or acquiring other business activities.
The business clause ensures that shareholders have control of the business and its risk profile, without limiting the Board or management's ability to carry out strategic and financially viable decisions within the defined purpose.
The Group's goals and main strategies are presented on page 6 of the annual report and in the Board of Directors' report. The company's articles of association are available on STX Europe' website.
3. Equity and dividends
The Group's equity as of 31 December 2007 amounted to NOK 5 160 million, which corresponds to an equity ratio of 16.9 percent. STX Europe regards the Group's present equity structure as appropriate and adapted to its objectives, strategy, and risk profile.
STX Europe' dividend policy states that the company's long-term goal is to pay a significant part of annual profits as dividends. The Group's dividend policy is among the factors considered in determining the Board's proposal for allocation of profit for 2007.
The 29 March 2007 annual shareholders' meeting of STX Europe authorized the Board to increase the company's share capital and to purchase own (treasury) shares. The authorizations are valid until the 2008 annual shareholders' meeting, though they are not valid after 30 June 2008.
Current Board authorizations are presented in the minutes from the shareholders' meeting available from the company's website: www.akeryards.com and in the section Shareholder information on page 84 of the annual report.
As of the 2008 annual shareholders' meeting, STX Europe' goal will be to adhere to the recommendations in the Code of Practice as to decisions on issuing authorizations so that any Board authorization to undertake capital increases is limited to defined purposes. Further, authorizations may not be valid for a period of time beyond the company's next annual shareholders' meeting. Similar conditions apply to Board authorizations to acquire own (treasury) shares.
4. Equal treatment of shareholders and transactions with close associates
The company has a single class of shares, and all shares carry the same rights in the company.
Equal treatment of all shareholders is key. If existing shareholders' pre-emptive rights are waived upon in an increase in share capital, the Board must justify the waiver.
Transactions in own shares must be executed through a stock exchange or otherwise at the stockmarket price.
In connection with Aker ASA's divestiture of its STX Europe shares, the Board decided to exercise its authorization to repurchase own (treasury) shares. A total of
2 000 000 shares at a per-share value of NOK 100 were acquired. After the share divestiture, Aker ASA is no longer considered a close associate. In 2007, STX Europe acquired a total of 5 000 000 own shares. All transactions were executed through a stock exchange or otherwise at the listed price, in accordance with the recommendations in the Code of Practice. Please see page 84 of the annual report for an overview of share repurchases.
There were no other transactions between the company and a shareholder or member of the Board or executive management, or parties closely related to the aforementioned, in 2007. There were also no transactions between STX Europe and other Group companies in which there are minority interests. In any future transactions with close associates, the Board will consider obtaining an independent evaluation of the transaction. See additional information on transactions with close associates in Note 36 to the consolidated annual accounts.
STX Europe is preparing guidelines designed to ensure that members of the Board of Directors and executive management notify the Board of any direct or indirect material stake they may have in agreements entered into by the Group. The guidelines will be completed in 2008.
5. Freely negotiable shares
STX Europe's shares are freely negotiable. No restrictions on transferability are found in the company's articles of association.
6. Annual shareholders' meetings
The company encourages shareholders to participate in shareholders' meetings. Its goal is to publish notices of shareholders' meetings and comprehensive supporting information, including the recommendations of the nomination committee, on the company's website no later than 21 days before the shareholders' meeting. The corresponding documentation will be distributed to shareholders no later than two weeks before the shareholders' meeting. The deadline for shareholders to give notice of their intention to attend the meeting is set as close to the date of the meeting as possible.
Shareholders who are unable to attend the meeting in person may vote by proxy. Pursuant to STX Europe's articles of association, the Board Chairman, or other person appointed by the Board Chairman, chairs shareholders' meetings. To the extent possible, Board members, the nomination committee leader, and the auditor attend shareholders' meetings.
If the issues on the agenda of the shareholders' meeting are of such a nature as to contraindicate the Board Chairman chairing the meeting, the Board Chairman is to appoint an independent meeting chair. The Board and the meeting chair should facilitate the shareholders' meeting voting separately on each of the candidates proposed for positions on corporate bodies.
Notices and minutes of shareholders' meetings are published as soon as practically possible via the Oslo Stock Exchange messaging service http://www.newsweb.no/ (ticker: AKY) and on the company's website www.akeryards.com, under the heading Investor Relations.
7. Nomination committee
The company has a nomination committee, as set forth in the company's articles of association. Pursuant to the articles of association, the nomination committee comprises no fewer than three members. The composition of the nomination committee must reflect the interests of shareholders, as well as maintain the committee members' independence from STX Europe's Board and executive management. Nomination committee members and the chair are elected by the company shareholders' meeting, which also determines remuneration payable to committee members.
Pursuant to the articles of association, the shareholders' meeting may adopt instructions for the nomination committee. No such instructions have hitherto been prepared.
Pursuant to the articles of association, the nomination committee recommends candidates for members of the Board of Directors. The nomination committee also makes recommendations as to remuneration of Board members. When making recommendations as to remuneration of Board members, the nomination committee must present the justification for its recommendations to the shareholders' meeting; the justification requirement will be implemented as of the 2008 annual shareholders' meeting.
The deadline for making proposals to the nomination committee will be published on the company's website well before the expiration of the deadline. STX Europe's nomination committee comprises the following members:
Gerhard Heiberg, Chairman (elected for the period 2007-2009)
Yngve Hågensen, member (elected for the period 2007-2009)
Kjeld Rimberg, member (elected for the period 2007-2009)
There are no Board members or members of the company's executive management on the nomination committee.
8. Corporate assembly and Board - composition and independence
Under an agreement with the Board's employee representatives, the company is not to have a corporate assembly. Pursuant to the company's articles of association, the Board comprises between three and ten members, one-third of whom are to be elected by and among Group employees. Further, up to three shareholder-elected deputy board members may be elected. Pursuant to the Code of Practice recommendations, the composition of the Board should always reflect the interests of shareholders and the company's needs for expertise, capacity, and diversity.
The current composition of the Board is presented on page 90 and 91 of the annual report and at www.akeryards.com; the Board members' expertise, capabilities, and independence are also presented. To be regarded as independent, a Board member must not have any direct or indirect material relationship with the company beyond his or her Board membership. As of year-end 2007, all shareholder-elected Board members were independent of the company's main shareholder, its management, and material business associates, which accords with the recommendations of the Code of Practice. Together, the shareholder-elected Board members represent a combination of expertise, capabilities, and experience from the finance business, industry, and NGOs. Board members' shareholdings are presented in Note 37 to the consolidated accounts and on page 90 and 91 of the annual report.
The Board chairman and deputy chairman are elected by the Board as a consequence of the aforementioned agreement with employee representatives, which stipulates that the company is not to have a corporate assembly. Board members are elected for a period of two years.
9. The work of the Board of Directors
The Board carries the overall responsibility for management of the company and for monitoring daily management and the company's operations. The Board is to ensure that the company maintains good internal control in accordance with current regulatory and internal guidelines for the business. The Board has a deputy chairman who may act as Board Chairman when the latter is unable to or should not lead the work of the Board of Directors.
The Board has adopted board instructions that regulate areas of responsibility, tasks, and division of roles of the Board, Board Chairman, President and CEO, and/or managing director. The Board instructions also feature rules as to Board schedules, rules for notice and chairing of Board meetings, decision-making rules, the President and CEO's and/or managing director's duty and right to disclose information to the Board, professional secrecy, impartiality, and other matters.
The Board has established a compensation committee to assist the Board with issues concerning remuneration of the President and CEO and members of executive management. The committee is to ensure that the company's remuneration principles are in line with shareholder interests and that the company has a compensation system that is consistent and competitive. The committee is to comprise no fewer than three Board members, each of whom must be independent of any type of relationship that in the Board's opinion could interfere with his or her exercise of independent judgment.
The company's managing director is not a Board member, thus, the company has not deemed it necessary to establish additional committees.
The Board evaluates the company's managing director and communicates its evaluative findings to him or her. The Board evaluates its own performance and expertise once a year.
10. Risk management and internal control
STX Europe' business operations imply an inherent risk which demands careful control and follow-up. In light of the results for 2007, the Board considers it necessary to strengthen this area going forward. In line with the company's need for better risk control, a risk manager has been recruited in 2008.
According to the Board instructions, the managing director shall inform the Board of the company's operations, position and result development on a monthly basis. The information can be given in writing or in a meeting.
Project risks and uncertainties
STX Europe' operations are subject to long term contracts, many of which are fixed-price, turnkey contracts that are awarded on a competitive bidding basis. Failure to meet schedule or performance guarantees or increases in contract costs can result in non-recoverable costs, which could exceed revenues realized from the applicable project. Where a project is identified as loss making, forward loss provisions are made. The accounting treatment is based on experience, events and management's best judgment. Inevitably, such circumstances and information may be subject to change in subsequent periods and thus the outcome may be better or worse than the assessments made in drawing up periodical financial reports.
The Group's activities expose it to a variety of financial risks, such as market risk (including currency risk, interest risk and price risk), credit risk, liquidity risk and cash-flow interest-rate risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Risk-management is carried out under policies approved by the Board of Directors.
The Board of Directors provides principles for overall financial risk management as well as policies covering specific areas such as foreign exchange risk, interest-rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments and investing excess liquidity.
See Note 34 and Note 35 to the consolidated accounts for additional information regarding the company's risk management systems.
11. Remuneration of the Board of Directors
The company's shareholders' meeting determines the remuneration payable to Board members based on the nomination committee's recommendations. Remuneration does not depend on STX Europe's financial performance. Remuneration reflects the Board's responsibilities, expertise, time spent, and the complexity of the business. Board members have no company share options.
Board members or companies associated with Board members should not take on responsibilities for the company beyond Board membership. If Board members do take on such extra responsibilities, all Board members must be so informed and the remuneration must be approved by the Board. No Board members had such responsibilities in 2007.
Additional information on remuneration paid to Board members for 2007 is presented in Note 2 to the parent company accounts.
12. Remuneration of executive management
The Board has adopted guidelines for remuneration of executive management pursuant to Section 6-16a of the Norwegian Public Limited Liability Companies Act. The guidelines apply to determination of salaries and other remuneration to the President and CEO and other members of executive management. Salary and other remuneration to the President and CEO are determined by the Board in a meeting.
The Group's guidelines for remuneration to executive management are found on page 78 of this annual report. The guidelines were presented to the 29 March 2007 annual shareholders' meeting for an advisory vote, and approval was obtained. Additional information on remuneration paid to members of executive management in 2007 is presented in Note 2 to the parent company accounts.
13. Information and communication
The company has prepared an Investor Relations (IR) policy, which is accessible on the company's website. The company's reporting of financial and other information is to be based on openness and on equal treatment of shareholders, the financial community, and other interested parties. The long-term purpose of STX Europe' IR function is to ensure the company's access to capital at competitive terms and to ensure shareholders correct pricing of shares. These goals are to be accomplished through correct and timely distribution of information that can affect the company's share price; the company is also to comply with current rules and market practices, including the requirement of equal treatment.
All stock exchange notifications and press releases are made available on the company's website www.akeryards.com; stock exchange notices are also available from www.newsweb.no (ticker: AKY). All information that is distributed to shareholders is simultaneously published on the company's website.
The company's financial calendar is found on page 2 of this annual report. The financial calendar is also published annually via the Oslo Stock Exchange's messaging system and on the company's website.
No guidelines have been prepared for the company's contact with shareholders other than via shareholders' meetings. The guiding principle of equal treatment of shareholders governs such contact, in addition to regulations governing insider information found in Norwegian securities legislation and Oslo Stock Exchange regulations.
In takeover situations, the Board will seek to ensure equal treatment of shareholders and to maintain the interests of all shareholders. The Board will also ensure that the target company's business activities are not unnecessarily disrupted and that shareholders receive relevant information and sufficient time to evaluate any takeover bid.
The Board should not seek to hinder or obstruct takeover bids for the company's activities or shares unless there are particular reasons for doing so.
Work on preparing principles for the Board's conduct in the event of a takeover bid is underway.
The auditor participates in the Board meeting that deals with the annual accounts. The company asks the auditor to provide an annual presentation to the Board of a plan for carrying out auditing services. Also, the auditor should provide the Board with an annual confirmation that the impartiality requirement has been met. The goal is for the auditor to review the company's in-house control with the Board at least once a year.
Remuneration for auditors, presented in Note 8 to the 2007 consolidated annual accounts, is stated for the two categories of auditing and other services. In addition, the annual shareholders' meeting receives information on remuneration of the company's auditor.
Work is underway to prepare guidelines for executive management's access to use the auditor for services other than auditing. The guidelines will be completed in 2008.