Corporate governance - Carlsberg Group

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Carlsberg Annual Report 2006 / Corporate governance 45The Board of Directors regularly – and at least once ayear – considers whether there is reason to update orstrengthen its members’ expertise with respect to theirduties.The Board of Directors may appoint committees forspecifi c purposes but has not yet found it necessary toestablish any permanent committees.None of the members of the Board of Directors areinvolved in the executive management of the Group.The Executive BoardThe Board of Directors appoints the CEO and othermembers of the Executive Board. Led by the CEO, theExecutive Board is responsible for the preparation andimplementation of strategic plans.The members of the Executive Board are not membersof the Board of Directors but do attend meetings of theBoard of Directors.RemunerationIn order to attract and retain managerial expertise, theremuneration of the members of the Executive Boardand other senior executives is determined on the basisof the work they do, the value they create, and conditionsat comparable companies. The remuneration of theExecutive Board is presented in the notes to the fi nancialstatements.This remuneration includes incentive programmes whichare to help align the interests of the Company’s managementand shareholders, as these programmes supportboth short-term and long-term goals.A share option programme for the Executive Board anda number of other senior executives in the Group hasbeen running since 2001. The programme entitles theseindividuals to purchase B-shares in Carlsberg A/S betweenthree and eight years after the options aregranted. The exercise price is the market price duringthe fi rst fi ve days following the publication of the profi tstatement for the year.The number and value of share options granted and outstandingare presented in the notes to the fi nancialstatements.The option programme is supplemented with performance-relatedbonus schemes covering a proportion ofthe Group’s salaried employees.The Board of Directors of Carlsberg A/S is not includedin the Company’s incentive programmes.The Carlsberg FoundationThe Carlsberg Foundation’s (“the Foundation”) holdingin Carlsberg A/S (“the Company”) is long-term andstrategic. The Foundation is therefore an active, demandingbut also supportive shareholder. The Foundationsupports the efforts of Carlsberg’s managementto create value for shareholders and other stakeholdersby furthering the Company’s growth and strengtheningits profitability.The Foundation is required by its Charter to hold atleast 51% of the Company’s share capital. At the endof 2006 the Foundation held 51.3% (excluding treasuryshares). Due to the combination of A-shares andB-shares held by the Foundation, it had 79% of thevotes at that same time. The Foundation’s ExecutiveBoard makes up an important part of Carlsberg A/S’Board of Directors, of which the Chairman of theFoundation is also Chairman.The Foundation’s Charter and Statutes lay down anumber of obligations and rights with respect toCarlsberg A/S. Thus the Carlsberg Laboratory, whichis part of the Foundation and an independent unitwithin the Carlsberg Research Center, receives a grantfrom the Foundation, but the Company is required tomeet its running costs. The Company also has an obligationto preserve various historical buildings on thebrewery’s site in Valby, Copenhagen.Further information about the Carlsberg Foundationcan be found at www.carlsbergfondet.dk.
46 Corporate governance / Carlsberg Annual Report 2006Risk managementThe Board of Directors reviews the overall risk exposureand the individual risk factors associated with the Group’sactivities (see separate section of this Annual Report).Such reviews are performed as required and at leastonce a year.The Board of Directors adopts guidelines for key areasof risk, monitors developments and ensures that plansare in place for the management of individual risk factors,which include commercial and fi nancial risks, insuranceand environmental matters, and compliancewith competition legislation.AuditingTo safeguard the interests of shareholders and the generalpublic, an independent auditor is appointed at theAnnual General Meeting following a recommendationfrom the Board of Directors. Before making its recommendation,the Board of Directors undertakes a criticalevaluation of the auditor’s independence, competenceetc.The auditor submits a report to the assembled Board ofDirectors twice a year and also immediately after identifyingany issues of which the Board of Directors shouldbe informed.An Internal Audit function was set up in 2006 to supportmanagement’s day-to-day control work.The OMX Copenhagen Stock Exchange’srecommendationsSince 2005 a number of recommendations for goodcorporate governance have formed part of the rules forcompanies listed on the OMX Copenhagen Stock Exchange.As in other European countries, companiesmust either comply with the recommendations or explaindepartures from them.As discussed above, Carlsberg’s corporate governancelargely complies with these recommendations, but with afew exceptions. These are presented and explained inthe following (references in brackets are to the relevantsections of the recommendations):Carlsberg’s departures from the OMX Copenhagen Stock Exchange’s recommendationsIt is recommended that at least half of the members of the Board ofDirectors elected by the General Meeting be independent. Any personwho has close links with a company’s main shareholder is not regardedas independent (V, 4a)Five of the eight members of Carlsberg’s Board of Directors electedby the General Meeting have close links with the Company’s principalshareholder, the Carlsberg Foundation, as they make up the Foundation’sExecutive Board. Thus these members are not independent asdefined in the recommendations. This has been the situation for manyyears. The Board of Directors is of the opinion that the combination ofmembers with different academic backgrounds and members with abusiness background ensures appropriate breadth in the members’approach to their duties and helps to ensure high-quality deliberationand decisions.It is recommended that information be provided on managerial positionsand directorships at Danish and foreign companies and anyother demanding organisational tasks performed by members of theBoard of Directors (V, 4d, 2)In accordance with section 107 paragraph 1 of the Danish FinancialStatements Act, Carlsberg provides information in its Annual Reporton managerial positions at other Danish companies held by membersof the Board of Directors. Information is also provided on other significantmanagerial positions and other organisational tasks performed inDenmark and abroad.It is recommended that information be provided on shares and optionsheld by the individual members of the Board of Directors in thecompany in question, and on any changes in these holdings duringthe financial year (V, 4d, 3)The members of the Board of Directors do not hold any options in theCompany. The section on shareholder information in the Annual Reportcontains information on the Board of Directors’ total holding ofshares in the Company, but the Board of Directors does not considerit useful to disclose information on individual members’ holdings.It is recommended that the annual report contain detailed informationon remuneration policy and the remuneration of the individual membersof the Board of Directors and the Executive Board (VI, 2-3 and 6)Carlsberg’s Annual Report presents information on the Group’s remunerationschemes, the components of remuneration, and the total remunerationof both the Board of Directors and the Executive Board,cf. section 69 of the Danish Financial Statements Act. It is not currentlyconsidered useful or reasonable to publish information on theremuneration of individuals. Remuneration schemes (including severancearrangements) and remuneration are believed to be in line withcomparable companies.It is recommended that the exercise price for options granted behigher than the market price at the time they are granted (VI, 4)In the current scheme, the exercise price corresponds to the marketprice during the first five days following the publication of the profitstatement for the year.
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Corporate governance - Carlsberg Group

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