Annual Report 2006 - Munters

Compensation CommitteeAt the statutory meeting of the Board of Directors on 26 April2006, the Board decided to appoint Berthold Lindqvist (convener)and Sören Mellstig as members of the CompensationCommittee for the period until the next statutory meeting.The Compensation Committee is charged with consideringand preparing proposals regarding salaries, bonuses, pensions,severance pay, options and warrants for the President andother senior managers who report directly to the Presidentand for such other similar issues assigned by the Board ofDirectors. On assignment from the Board, the CompensationCommittee will present proposals on principles for compensationand other compensation terms for company managementto be approved by the Annual General Meeting. The CompensationCommittee’s work is regulated by special instructionsadopted by the Board of Directors as part of its WorkingProcedures. During 2006, the Compensation Committeeheld five meetings at which all members were in attendanceand had regular contact within the Committee in conjunctionwith employment and other compensation issues.CompensationFees to the members of the Board of Directors elected by theAnnual General Meeting are decided by the Annual GeneralMeeting based on the proposal by the Nominating Committee.For the period from the 2006 Annual General Meeting throughthe 2007 Annual General Meeting, the fee paid to the Chairmanwas SEK 400,000. Other members elected by the AnnualGeneral Meeting, who are not employees of the Company, werepaid fees of SEK 175,000. Furthermore, a fee of SEK 50,000 waspaid to the Chairman of the Audit Committee and SEK 25,000to each of the other members of the Audit Committee. Nofurther compensation was paid to any Board member.Reporting and controlThe Board of Directors and the Audit Committee supervisethe quality of financial reporting and the Company’s internalcontrol systems and monitor the Company’s risk exposure.This takes place in part through instructions to the Presidentand the establishment of requirements on the contents of thereports on financial circumstances that are regularly submittedto the Board of Directors, as well as through reviewswith management and the auditors. The Board of Directorsand the Audit Committee review and verify the quality offinancial reporting, including the year-end report and theAnnual report and have delegated responsibility to Companymanagement to verify the contents of press releases containingfinancial information and presentation materials usedin conjunction with meetings with the media, owners andfinancial institutions.Company managementGeneralThe President leads operations in accordance with the SwedishCompanies Act and within the framework established bythe Board of Directors. In consultation with the Chairman ofthe Board of Directors, the President prepares the informationand supporting materials for decisions required for Boardmeetings, presents matters for consideration by the Board andmotivates proposals for decision. The President leads Groupmanagement’s work and takes decisions in consultation withothers in management. Group management currently consistsof six persons. Company management conducts regular businessreviews under leadership of the President 12 times eachyear, often in conjunction with visits to various Group units.The President and other members of Group management arepresented on page 69 of the Annual Report.CompensationAt the 2006 Annual General Meeting, the Chairman ofthe Board of Directors informed the shareholders about theprinciples for compensation to senior executives. Currentcompensation levels are presented in Note 27. The proposalfor guidelines for the determination of salaries and othercompensation paid to senior executives will be submitted tothe 2007 Annual General Meeting for approval.Internal auditThe Company has a simple legal and operative structure withestablished management and internal control systems. TheBoard of Directors and the Audit Committee monitor theCompany’s assessment of internal controls, in part through contactwith the Company’s auditors. For these reasons, the Boardof Directors has elected not to conduct special internal audits.AuditorsThe 2004 Annual General Meeting elected the auditing firmErnst & Young as the Company’s auditor for the period upuntil the 2008 Annual General Meeting with Björn Fernströmas auditor in charge. The auditors are presented on page68 of the Annual Report. The auditors work in accordancewith an audit plan whereby comments were obtained from theAudit Committee and the Board of Directors and reported itsobservations to the Audit Committee and the Board of Directors,in part during the audit itself and in part in conjunctionwith adoption of the 2006 Annual Report on 19 February2007. The auditors also participate in the Annual GeneralMeeting at which they report on their work and observations.During the year, the auditors had consulting assignmentsapart from auditing, primarily relating to taxes.The Board’s report on internal controls pertainingto the financial reporting for the 2006 fiscal yearThe Code specifies that the Board of Directors shall issuea report on internal controls with respect to those portionsrelating to how financial reporting is organized and how wellit has functioned during the year. Munters Board has electedto follow the statement issued by the Swedish Corporate GovernanceBoard on 5 September 2006 that it is sufficient for2006 if the Board of Directors in its Corporate GovernanceReport limits the report on internal controls to a descriptionof how internal control is organized in respect to financialreporting, without expressing an opinion on how well it functions.The auditor’s review of the report is voluntary.Description of how internal controls are organizedControl environment – Effective working procedures onthe part of the Board of Directors is the basis for satisfactoryinternal controls. Munters’ Board of Directors has anestablished Working Procedure for its work and instructionsfor the Board’s committees. One aspect of the Board’s workconsists of formulating and approving the policies that governthe Company’s work with internal controls. Another aspectis creating prerequisites for an organizational structure withclear roles and responsibilities that encourage effective managementof business risks. Senior management is responsible36 M U N T E R S A N N U A L R E P O R T 2 0 0 6