Norwegian’s objective for corporate governance is based on accountability, transparency, fairness and simplicity with the ultimate goal of maximizing shareholder value while creating added value for all stakeholders. The principles are designed in compliance with laws, regulations and ethical standards. Norwegian’s core values are Simplicity, Directness and Relevance, but no business conduct within the Group should under any circumstance jeopardize Safety and Quality.
How we understand the concept
The Group's core values and corporate Code of Ethics are fundamental for Norwegian’s corporate governance. Corporate governance deals with issues and principles associated with the distribution of roles between the governing bodies in a company, and the responsibility and authority assigned to each body. Good corporate governance is distinguished by responsible interaction between owners, the Board and management in a long-term, productive and sustainable perspective. It calls for effective cooperation, a defined division of responsibilities and roles between shareholders, the Board and management, respect for the Group's other stakeholders and open and honest communication with the communities in which the Group operates.
Detailed ethical guidelines are available for all employees on the Group intranet.
In line with the Norwegian code of practice for corporate governance, a review of the major aspects of Norwegian Air Shuttle ASA’s governance structure follows below.
Business
Norwegian’s business is clearly defined in paragraph 3 in the articles of association which states that “The Group’s objective is to be engaged in aviation, other transport and travel-related business activities as well as activities connected therewith. The Group may also be engaged directly or indirectly in other forms of Internet-based provision of goods and services, including car rental, hotel booking, payment services, financial services and services related to credit cards. Participation in such activities as mentioned may take place through co-operation agreements, ownership interests or by any other means.”
The Group has clear goals and strategies for its business. These are discussed in the Group´s Quality Manual and are also made available to the public in the Annual Report and on the Group’s website www.norwegian.com.
Equity and Dividends
The Group’s equity at year-end 2009 was MNOK 1,601.6, equivalent to an equity ratio of 32%. The gearing ratio was 9.8%. The Board deems this to be adequate considering the Group’s strategy and risk profile.
The Board of Directors recommends not to distribute dividends as it is considered to be in the best interest of the shareholders to retain funds for investment in expansion and other investment opportunities as stated in the articles of association, thereby enhancing profitability and shareholder value. Dividends should under no circumstance be paid if equity is below what is considered to be an appropriate level.
The covenants to the bond agreement entered into on 16 April 2007 restrict dividend payment until the maturity date of the bond on 19 April 2010.
Due to Norwegian Air Shuttle ASA’s rapid expansion, competitive environment and focus on being flexible and quick to adapt to changing market conditions, the General Assembly has decided to deviate from the Norwegian code of practice for corporate governance’s recommendations with respect to capital increases. The General Assembly has granted the Board of Directors a mandate to increase the Company’s share capital over a two-year period. The mandate granted to the Board is limited to a 15% capital increase. The General Assembly has granted the Board of Directors a mandate to acquire treasury shares for a period of 18 months. The mandate granted to the Board is limited to a 10% capital increase.
Equal Treatment of Shareholders and Transactions with Close Associates
Norwegian Air Shuttle ASA has only one class of shares. Transactions in own shares are performed in line with what is considered to be good business practice for companies listed on the Oslo Stock Exchange.
Material transactions between the Group and key stakeholders, in particular shareholders, members of the Board and Executive Management, are subject to approval from the Board of Directors. Such transactions are duly noted in the minutes from the Board meeting and are also explicitly stated in the notes to the consolidated accounts. At present, the Chairman and CEO are both partners in the law firm Vogt & Wiig, which is the legal advisor to Norwegian Air Shuttle ASA. The Group does not have any arrangements for third-party valuations of named transactions as the current method offers a sufficient level of transparency and accountability.
In cases where members of the Board of Directors or the Executive Management have other direct or indirect material interests in transactions entered by the Group, this is stated in the notes to the consolidated accounts.
Freely Traded Shares
There are no restrictions on trading of the Company’s shares in the articles of association or elsewhere.
General Assembly
The Board of Directors has ensured that shareholders may exercise their rights at the General Assembly, making the summons and related documentation available on the website in due time before the deadline warranted by law. The documents are sent to the shareholders at the same time. The shareholders’ deadline for notice of their intended presence is three days before the General Assembly, and shareholders may be present and vote by proxy. The Board of Directors, Nomination Committee and the auditor are required to be present. The chairman of the meeting is democratically elected by the shareholders. The Board adheres to the requirements of the Norwegian code of practice for corporate governance with respect to the summons to the General Assembly.
Nomination Committee
The Nomination Committee's duty is to nominate candidates to the AGM for the shareholder-elected directors' seats. The articles of association states that the committee shall have four members, and the chairman of the committee is the chairman of the Board. The remaining three members are elected by the General Assembly every second year. The next election is due in 2010.
The current Nomination Committee consists of the chairman of the Board, one employee and two external members representing major shareholders in the Company.
The Board of Directors recommends deviating from the recommendation as the chairman of the Board is a fixed member of the committee. This is to ensure that nominees meet the requirements for expertise, capacity and diversity set forth by the Board members.
Corporate Assembly and Board of Directors, Composition and Independence
Norwegian Air Shuttle ASA has, in agreement with the employee unions and as warranted by Norwegian law, no corporate assembly. Instead, the Company three employee representatives on the Board of Directors. According to the articles of association the Board must consist of between six and eight members. There are currently eight members.
The shareholder-elected members of the Board of Directors have been nominated by the Nomination Committee to ensure that the Board of Directors hold the necessary expertise, capacity and diversity. Board members have competence and experience from the transport sector and other competitive consumer sectors, relevant network connections and experience from business, finance, capital markets and marketing. The chairman is elected by the Board, and the Board of Directors has a deputy chairman. Board members are elected for a period of two years.
The majority of the Board members are independent from the Executive Management and material business contacts.
A comprehensive biography of the Board of Directors and the Executive Management is available on Norwegian’s Investor Relations pages on the web.
The Work of the Board of Directors
The Board of Directors works in accordance with the rules laid down by Norwegian law. The Board has annual strategy seminars where issues such as objectives, strategies and implementations are addressed.
The Board of Directors issues instructions for its own work. The instructions for the Executive Management are under review.
Audit Committee
At the General Assembly on 11 May 2010 the Board proposes that the Board act as the Audit Committee. The Audit Committee has responsibilities related to financial reporting, the independent auditor, internal audits and risk management.
Risk Management and Internal Control
Management draws up monthly performance reports that are sent to and reviewed by the directors. Moreover, financial reports, risk reports and safety reports are drawn up, all of which are subject to review at the Board meetings.
Remuneration of the Board of Directors
Based on the consent of the General Assembly, it is assumed that the remuneration of Board members reflects the respective members’ responsibility, expertise, time commitment and the complexity of the Group’s activities. None of the Board members have remuneration based on performance, and no options are granted to the Board members. In cases where Board members take on specific assignments for the Group which are not in the power of their commission to the Board, this must be notified immediately to the rest of the Board members and if the transaction is of a substantial nature this is explicitly stated in the notes to the consolidated accounts.
Details on the remuneration to individual Board members are available in the notes to the consolidated accounts.
Remuneration of the Executive Management
The Board of Directors has established guidelines for the remuneration of the Executive Management. These guidelines are available in the notes to the consolidated accounts. The guidelines are presented to the General Assembly. The remuneration package should encourage a strong and long-term profit oriented culture without damaging the reputation and standing of the Group in the public eye and thereby ensure the convergence of the financial interests of shareholders and Executive Management.
The Executive Management currently has a stock option plan in effect. Comprehensive information on remuneration and incentive programs is available in the notes to the consolidated accounts.
Information and Communications
All Group financial reporting complies with Norwegian legislation. The financial statements and annual reports are prepared to ensure accountability, transparency and fairness to all stakeholders in the Group.
A financial calendar is prepared and published on the Group website and is also distributed in accordance with the rules of the Public Companies Act and the rules applicable to companies listed on the Oslo Stock Exchange. All the information distributed to the shareholders is also published on the Group website. The Group has regular investor meetings, public interim results presentations and an investor relations department.
The Board considers that these measures enable and ensure continuous informative interaction between the Company and the shareholders.
Takeovers
There are no limitations with respect to the purchase of shares in the Company. In the event of a take-over bid the Board of Directors will act in the best interest of the shareholders and in compliance with all rules and regulations applicable in such an event. In the case of a take-over bid the Board will refrain from taking any obstructive action unless agreed upon by the General Assembly. The Company’s bond issue has a change of control clause that allows bondholders to call for redemption of the bonds at par in the event of a change of control.
Auditor
The Auditor annually submits the main features of the plan for the audit of the Group to the Board of Directors.
The Auditor participates in meetings of the Board of Directors that deal with the annual accounts. At these meetings the Auditor reviews any material changes in the Group’s accounting principles, comments on any material estimated accounting figures and reports all material matters on which there has been disagreement between the Auditor and the Executive Management of the Company.
The Auditor presents a review of the Group’s internal control procedures at least once a year to the Board of Directors, including identified weaknesses and proposals for improvement.
The CEO and the CFO are present at all meetings between the Board of Directors and the Auditor. If requested by the Board or the Auditor, meetings are to be held without the management present. The management and the Board of Directors evaluate the use of the Auditor for services other than the audit.
The Board receives annual confirmation from the Auditor that the Auditor continues to meet the requirement for independence.
The Board of Directors reports the remuneration paid to the Auditor at the Annual General Assembly, including details of the fee paid for audit work and any fees paid for other specific services.