Annual Report 2007 - Novo Nordisk

corporate
governance
Corporate governance refers to the way a company is managed
and the major principles and frameworks that regulate interaction
between the company’s managerial bodies, its owners and other
stakeholders.
Novo Nordisk's values are consistent with principles of good governance.
The Novo Nordisk Way of Management forms the values-based
governance framework for the company and is an integrated part of
the company’s corporate governance (see pp 6–7).
Governance structure
The company has a two-tier board structure consisting of the Board of
Directors and Executive Management. The two bodies are separate,
and no person serves as a member of both.
Shareholder rights
Novo Nordisk’s share capital is divided between A shares and B shares.
All A shares are held by Novo A/S, a Danish public limited liability company
wholly-owned by the Novo Nordisk Foundation, which is a private,
profit-making, self-governing institution. The B shares are traded
on the stock exchanges in Copenhagen and London, and in the form of
ADRs on the New York Stock Exchange. Each A share carries 10 votes,
whereas each B share carries one vote (see p 50).
Special rights attached to A shares include preemptive subscription
rights in case of an increase of the A share capital, and preemptive purchase
rights in case of a sale of A shares and priority dividend if dividend
is below 0.5%, while B shares take priority for dividend between 0.5%
and 5% and B shares take priority for winding-up proceedings.
Novo Nordisk is of the opinion that the current share and ownership
structure is appropriate and preferable for the long-term development
of the company. A study 11) commissioned by the European Commission
concluded in 2007 that control-enhancing mechanisms such as the A
and B share structure are allowed in all European countries investigated
and that they do not have a negative impact on shareholder value creation.
Novo Nordisk believes that the transparency inherent in its share
structure is to the benefit of shareholders, who know in advance the
relative voting power of each share class. The current differentiation of
voting rights cannot be revoked as this would violate the articles of association
of the Foundation, which have been approved by the Danish
authorities.
Novo Nordisk is not aware of the existence of any agreements between
shareholders on the exercise of votes or control.
Shareholders have the ultimate authority over the company, and exercise
their right to make decisions regarding Novo Nordisk at general
meetings, either in person or by proxy. Resolutions can be passed by a
simple majority, while resolutions to amend the articles are subject to
adoption by at least two thirds of votes cast and capital represented unless
stricter requirements are imposed by Danish company law. The annual
general meeting approves the annual report and any amendments
to the articles. The general meeting elects 4–10 directors plus the auditor.
All shareholders may, no later than 1 February, request that proposals
for resolution be included on the agenda. All shareholders may also
ask questions at the general meetings. Simultaneous interpretation between
English and Danish is available, and the meeting is webcast live.
The Board of Directors
On behalf of the shareholders, the Board determines the overall strategy
and actively contributes to developing the company as a focused
global pharmaceutical company. It supervises Executive Management
in its decisions and operations. The Board may issue new shares or buy
back shares in accordance with authorisations granted by the general
meeting and recorded in the minutes.
The guiding principle in composing the Board is that it should comprise
individuals whose particular knowledge and experience enables
the Board as a whole to attend to the interests of shareholders, employees
and other stakeholders.
New board members undergo an induction programme equivalent
Corporate governance
benchmark 2007
In 2007, Novo Nordisk commissioned ISS
Corporate Services Inc. (ISS) to appraise the
company’s corporate governance practices
against those of its national, European and US
peers as well as international best practice
standards.
The ISS study confirmed Novo Nordisk’s
strong performance in its corporate governance
disclosure practice. It also provided compelling
evidence of Novo Nordisk’s firm commitment
to good corporate governance and to the
maximisation of shareholder value.
ISS also revealed areas where Novo Nordisk
could consider adjustments. Some adjustments
have already been implemented and others
will be considered in coming years.
Novo Nordisk remains committed to the
general principles of good corporate govern -
ance and aims to enhance its culture so as to
foster these principles at every level of the
organisation.
One recommendation that will be put to
the Annual General Meeting 2008 concerns
an adjustment of the threshold for calling an
extraordinary general meeting. So as to bring
this procedure into line with best practice, it is
proposed that the threshold be reduced from
the current 10% of total share capital to 5%.
This would, naturally, simplify the process of
calling an extraordinary general meeting and
would give shareholders greater voice.
Another recommendation in the ISS report,
which will also be put to the 2008 Annual
General Meeting, concerns the Board’s standing
mandate to increase the share capital. Best
practice in this regard is that a board’s ability to
issue B shares without preemptive subscription
rights for current B shareholders is limited to a
maximum of 20% of the share capital. Novo
Nordisk’s Board currently has the right to issue
B shares without preemptive subscription
rights to a value corresponding to 34.1% of
the share capital. The proposal is to reduce this
to approximately 20%.
42 Novo Nordisk Annual Report 2007