Denmark’s Code of Corporate Governance

A. Purpose The Corporate Governance Code of Denmark, hereinafter called the ‘Code’ is commissioned to monitor Corporate Governance developments at national and international level, as well as to strive for continuity in Corporate Governance work in Denmark:

1. to support value creation, accountable management and to contribute to the long-term success of companies.
2. to ensure timely information as well as transparency.
3. to acquire capital, which in turn reduces the costs of companies.

B. General Meeting of Shareholders When organising the general meeting, it is important to ensure that the shareholders have an opportunity to participate and that they are able to voice their opinions at the general meeting. Considerations should address holding the general meeting wholly or partly electronically to ensure that the shareholders are able to participate without having to be physically present. The shareholders will then be in a position to influence and guide the management of the company on the development of the company in the short and long term. The Code recommends that proxies granted for the general meeting allow shareholders to consider each individual item on the agenda. C. Board of Directors The Code 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.
• that the company’s articles of association stipulate a retirement age for members of the board of directors.
• that members of the board of directors elected by the general meeting be up for election every year at the annual general meeting.
• that a majority of the members of a board committee be independent.

D. Audit Committee: The Code recommends that the board of directors 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 regulated market.

The code 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.

The code recommends that that the audit committee:

• annually assesses the need for an internal audit, and in such case, makes 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.

E. Nomination Committee The Code recommends that the board of directors establish a nomination committee chaired by the chairman of the board of directors with at least the following preparatory tasks:

• describe the qualifications required by the board of directors 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 experience of the individual members of management, and report to the board of directors in this respect,
• consider proposals from relevant persons, including shareholders and members of the board of directors and the executive board for candidates for the board of directors and the executive board, and
• propose an action plan to the board of directors on the future composition of the board of directors, including proposals for specific changes.

F. Remuneration Committee The Code recommends that the board of directors establish a remuneration committee with at least the following preparatory tasks:

• to 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 compliance with the company’s remuneration policy and the assessment of the performance of the persons concerned. The committee should have information about the total amount 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 company in general.
• The Code recommends that remuneration of members of the board of directors does not include share options.
• The Code recommends that the company’s remuneration policy and compliance with this policy be explained and justified annually in the chairman’s statement at the company’s general meeting.
• The Code recommends that the proposed remuneration for the board of directors for the current financial year be approved by the shareholders at the general meeting.

G. Independence of the board of directors 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 directors 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 member of the executive board, or senior staff member in the company, a subsidiary undertaking or an associate,
• within the past five years, have received larger emoluments from the company/group, a subsidiary undertaking or an associate in another capacity than as 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, shareholder, 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 partner at the external auditor, have been chief executive in a company holding cross-memberships with the company,
• have been member of the board of directors for more than 12 years, or
• have been close relatives with persons who are not considered independent.

H. Publication on Company’s Website The company shall publish the following on the company’s website: The terms of reference of the board committees,

• 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.

I. Responsibilities of the board of directors The board of directors is responsible for the overall and strategic management of the company to ensure value creation in the company:

• at least once a year the board of directors take a position on the matters related to the board’s performance of its responsibilities
• 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 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 presents this in the management commentary on the company’s annual report and/or on the company’s website.
• the board of directors annually review and approve guidelines for the executive board; this includes establishing requirements for the executive board on timely, accurate and adequate reporting to the board of directors.
• at least once a year the board of directors discuss the composition of the executive board, as well as developments, risks and succession plans.
• once a year the board of directors discuss the company’s activities to ensure relevant 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.

J. Conclusion Recommendations are the appropriate tool for companies to implement good and ascertainable Corporate Governance. The Committee is of the opinion that self regulation is the best form of regulation in relation to Corporate Governance and this view is shared globally. However, this requires that society, companies and investors should have positive attitude towards Corporate Governance. In order to create the transparency necessary for investors, companies must consider each of the recommendations and provide information on whether or not they will be complying with the recommendation concerned. The descriptions provided for each of the recommendations must therefore be specific and adequate.