Norwegian is a growth company with continuous investment plans. 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 investments in expansion and for other investment opportunities as stated in the articles of association, thereby enhancing profitability and shareholder value. Dividends should under no circumstances be paid if equity is below what is considered to be an appropriate level. A financial covenant to the bond agreements entered into in, May 2015, December 2015, February 2017 and November 2017 restricts dividend payments, (except for the benefit of the employees and/or Management and/ or Directors for any Group Company) until maturity of the last bond in November 2020. The Group shall maintain a book equity of minimum NOK 1 500 million and a minimum liquidity level of NOK 500 million.
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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 circumstances jeopardize safety and quality.
How we understand the concept
The description of the main features is generally structured like the Code of Practice. As recommended, more details are provided on the individual points. The topic of corporate governance is subject to annual evaluation and discussion by the Board. The annual evaluation was carried at the Board meeting on 21 March 2018. The Group's core values and corporate code of ethics are the fundamentals of Norwegian’s corporate governance. Corporate governance deals with issues and principles associated with the distribution of roles between the governing bodies of a company, and the responsibilities and authorities assigned to each body. Good corporate governance is distinguished by responsible interaction between the owners, the Board and the Management in a long-term, productive and sustainable perspective. It calls for effective cooperation, which means a defined division of responsibilities and roles between the shareholders, the Board and the Management, and also respect for the Group's other stakeholders as well as open and honest communication with the communities in which the Group operates. 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.
Norwegian’s business is clearly defined in paragraph 3 of its articles of association: “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 presented in the Groups quality manual and are also made available to the public in the annual report and on the website www.norwegian.com.
The Group’s equity at year-end 2017 was NOK 4 091 million equivalent to an equity ratio of 9 per cent. The Board deems this to be adequate considering the Group’s strategy and risk profile.
The general meeting has granted the Board an authorization to increase the Company’s share capital by 1.75 per cent of the existing share capital through issuance of new shares under the incentive schemes. The authorization granted to the Board is limited to a total of 625 000 shares and is valid until next Annual General Meeting.
The general meeting has granted the Board an authorization to increase the Company’s share capital by 8.25 per cent of existing share capital through issuance of new shares as consideration for the acquisition of businesses falling within the Company’s business purposes, or for necessary strengthening of the Company’s equity. The authorization granted to the Board is limited to a total of 2 950 963 shares and is valid until next Annual General Meeting.
The general meeting has granted the Board of Directors an authorization to acquire treasury shares for a period of 18 months reckoned from the date of the general meeting’s resolution. The mandate may as an example, be used in connection with employee incentive schemes. The mandate granted to the Board is limited to a total of 3 575 963 shares.
Freely negotiated shares
There are no restrictions on trading of the Company’s shares in the articles of association or elsewhere.
The Board of Directors has ensured that the shareholders may exercise their rights at the general assembly, making the summons and related documentation available on the website.
At least three weeks written notice must be given to call the annual general meeting. The relevant documents, including the election committee's justified slate of nominees when new members are up for election or existing ones are up for re-election, are available at the Group's website at least 21 days prior to the date of the general meeting. The general meeting in May 2016 decided that “An extraordinary general meeting may be called with fourteen days’ notice if the Board decides that the shareholders may attend the general meeting with the aid of electronic devices, cf. Section 5-8a of the public Limited Companies Act”. The Board of Directors, election committee and the auditor are required to be present. The Management is represented by the Chief Executive Officer and the Chief Financial Officer and other key personnel on specific topics.
The agenda is set by the Board, and the main items are specified in Article 7 of the Article of Association. According to the Company’s Articles of Association the General Meeting shall be chaired by the Chair of the Board. The minutes of the general meeting are available on the Group's website.
The election committee's task is to nominate candidates to the general meeting for the shareholder-elected Directors' seats. The articles of association state that the committee shall have four members, and the Chair of the committee is the Chair of the Board. The remaining three members are elected by the general meeting every second year. The next election is due in 2018. The guidelines for the election committee are included in the Company’s articles of association and were last approved by the general meeting in May 2011. To ensure that nominees meet the requirements for expertise, capacity and diversity set forth by the Board members, the Chair of the Board is a permanent member of the committee. As described in the guidelines, the election committee should have contact with shareholders, the Board of Directors and the Company’s Executive personnel as part of its work on proposing candidates for election to the Board.
The election committee currently consists of the Chair of the Board, one employee and two external members representing major shareholders in the Company. The current composition of the committee was elected by the Annual General Meeting on 10 May 2016 and consist of;
Portfolio manager, Skagen Fondene
CEO, Stenshagen Invest AS
Sven F. Harmansen
Pilot and shareholder in the Company
None of the members of the election committee represent Norwegian's Management. The majority of the members are considered as independent of the Management and the Board. The composition of the election committee is regarded as reflecting the common interests of the community of shareholders.
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 has three Directors elected by the employees on the Board of Directors. According to the articles of association, the Board must consist of between six and eight members. At year end there were seven members.
The shareholder-elected members of the Board of Directors have been nominated by the election committee to ensure that the Board of Directors possesses the necessary expertise, capacity and diversity. The Board members have competencies in and experiences from the transport sector and other competitive consumer sectors, relevant network connections and experiences from businesses, finance, capital markets and marketing. The Chair and deputy Chair are elected by the Board. The Board members are elected for a period of two years.
The majority of the shareholder elected members of the Board are considered to be autonomous and independent of the Company’s Executive personnel and material business contacts. At least two of the members of the Board, who are elected by shareholders, are considered autonomous and independent of the Company’s main shareholder(s). Among the shareholder-elected Directors, there are two men and two women. Detailed information on the individual director can be found on the website at www.norwegian.com. The CEO is not a member of the Board of Directors.
The work of the Board of Directors
The Board of Directors’ work is in accordance with the rules of Norwegian law. The Board has an annual plan for its work, which particularly emphasizes objectives, strategies and implementations. The Board holds annual strategy seminars, in which objectives, strategies and implementations are being addressed.
The Board of Directors issues instructions for its own work. If the Chair of the Board of Directors is or has been actively engaged in a given case, another Board member will normally lead discussions concerning that particular case.
There is a clear division of responsibilities between the Board and the Executive Management. The Chair is responsible for ensuring that the Board's work is conducted in an efficient, correct manner and in accordance with the Board's terms of reference. The CEO is responsible for the Group's operational Management. The Board has drawn up special instructions for the CEO.
The audit committee was established by the general meeting in 2010. To ensure that nominees meet the requirements of expertise, capacity and diversity set forth by the Board members, the Board of Directors acts as the Company’s audit committee. The Board of Directors conducts an annual self-assessment of its work competence and cooperation with the Management and a separate assessment of the Chair.
Risk management and internal control
The Management issues monthly performance reports to the Board of Directors for review. Quarterly financial reports are prepared and made available to the capital market in accordance with the reporting requirements applicable to listed companies on Oslo Børs. The quarterly financial. reports are reviewed by the audit committee prior to Board approval and disclosure. Moreover, financial reports, risk reports and safety reports are drawn up, all of which are subject to review at Board meetings. The auditor meets with the entire Board in connection with the presentation of the interim annual financial statements, and when otherwise required. Policies and procedures have been established to manage risks. The Group’s Board of Directors reviews and evaluates the overall risk Management systems and environment in the Group on a regular basis. The Board ensures sound internal controls and systems for risk Management through, for example, annual Board reviews of the most important risk factors and internal controls. Risk assessment and the status of the Group’s compliance and corporate social responsibility are reported to the Board annually. The Group’s financial position and risks are thoroughly described in the Board of Directors’ Report.
Remuneration of the Board of Directors
Based on the consent of the general meeting, it is assumed that the remuneration of Board members reflects the respective members’ responsibilities, expertise, time commitments and the complexities of the Group’s activities. In cases where Board members take on specific assignments for the Group, which are not taken on as part of their office, the other Board members must be notified immediately and if the transaction is of a substantial nature this will be explicitly stated in the notes to the consolidated accounts. Details of the remuneration of individual Board members are available in the notes to the consolidated accounts.
Remuneration of executive personnel
The Board’s statement on Management compensation policy is prepared in accordance with the public limited companies act 6-16a and includes the Company’s share option program, if any. The statement is presented at the Annual General Meeting. The principles of leadership remuneration in Norwegian Air Shuttle ASA are to stimulate a strong and lasting profit oriented culture. The total compensation level should be competitive, however, not market leading compared to similar organizations. The Board determines the remuneration of the CEO, and the guidelines for remuneration of the Executive Management. The remuneration of the Board and the Executive Management must not have negative effects on the Group, nor damage the reputation and standing of the Group in the public eye The Executive Management has not been given any specific rights in case of terminated employment. Details of the remuneration of individual members of the Executive Management are available in the notes to the consolidated accounts.
Information and communications
Norwegian has established guidelines for the Company’s reporting of financial and other information based on transparency and with regard to the requirement of equal treatment of all parties in the securities market. The Board of Directors annually reviews these guidelines. A financial calendar is prepared and published on the Group’s 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. Information distributed to the shareholders is also published on the Group’s website. The Group holds regular investor meetings and public interim results presentations, and has an investor relations department. Norwegian has separate instructions for investor relations regarding communication with investors and how insider information shall be treated. The Board of Directors has prepared guidelines for the Group’s contact with shareholders outside the general meeting. The Board considers that these measures enable and ensure continuous informative interactions between the Company and the shareholders.
There are no limitations with respect to the purchases 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 the rules and regulations applicable for 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 meeting. The Company’s bond issue has a change of control clause that allows bondholders to call for redemption of the bonds at 101 per cent of par in the event of a change of control.
The auditor annually presents the main features of the audit plan for the Group to the audit committee. The auditor participates in the 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 a 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 audit committee, including identified weaknesses and proposals for improvements. The auditor participates in meetings with the audit committee and present the report from the auditor that addresses the Group’s accounting policy, risk areas and internal control routines. The CEO and the CFO are present at all meetings with the Board of Directors and the auditor, except for one meeting a year, in which only the auditor, the Board and the audit committee are present. The Management and the Board of Directors evaluate the use of the auditor for services other than auditing. The Board receives annual confirmation that the auditor continues to meet the requirement of independence. The Board of Directors reports the remuneration paid to the auditor at the annual general meeting, including details of the fee paid for audit work and any fees paid for other specific services.