Annual Report 2011 - Skanska

Certain counterparties − for example customers, subcontractors orsuppliers − may have difficulty living up to their contractual obligations.Skanska regularly makes assessments of counterparty risks inorder to be prepared for this.To ensure a systematic and uniform assessment of construction projects,Skanska uses a common model for identifying and managing risksthroughout the Group. With the help of this model, Skanska evaluatesconstruction projects continuously, from tender preparations to completionof the assignment.In Residential Development operations, there are risks in all phasesfrom concept to completed project. Such external factors as interestrates and the willingness of customers to buy homes are of crucialimportance to all decisions in the process. Homes are built to be soldindividually. To minimize risks, the goal is to completely develop andsell the units in a given project during a single economic cycle, whenvariations in market conditions are small and predictable. New projectsare normally started when a predetermined percentage of homes is soldor pre-booked.Greater standardization, with shorter lead times, reduces exposure tothe risk of fluctuations in market demand.Due to lengthy planning and permitting processes, ample lead time isrequired to ensure a supply of building rights (a “land bank”) for constructionthat will meet demand.Commercial Property Development manages risks connected withexternal factors, customers’ space needs and the willingness ofinvestors to buy commercial properties. By means of frequent customercontacts, Skanska tracks the space requirements of customerscontinuously.Risks are limited because the Commercial Property Development andResidential Development business streams have established ceilings onhow much capital may be tied up in holdings in projects that have notbeen pre-leased or sold.Investments made in Infrastructure Development require efficientrisk management during the development phase, that is, before andafter financial close.During the construction phase, the greatest risk is that the asset cannotgo into service on schedule and that quality standards are not met.Depending on the type of asset, there are risks during the entire steadystate phase, which may extend over decades. Examples of such risks areexternal factors − demographic, environmentally related and financial− that are managed during the service life of a project. There is alsoa risk that life-cycle costs and operating and maintenance costs willexceed the forecasts that were made.For a further account of material risks and uncertainty factors, see thesection on market outlook as well as Note 2, “Key estimates and judgments.”Financial risks are described in Note 6, “Financial instrumentsand financial risk management.” Ongoing litigation is described inNote 33, “Assets pledged, contingent liabilities and contingent assets.”CORPORATE GOVERNANCE REPORTThis corporate governance report for 2011 has been reviewed by theCompany’s external auditors in compliance with Chapter 9, Section31 of the Swedish Companies Act. The report is part of the Report ofthe Directors, in compliance with Chapter 6, Section 6 of the AnnualAccounts Act. According to the latter section, the corporate governancereport shall include certain specific disclosures. These are providedpartly in the running text below. Other mandatory information hasbeen gathered under the heading “Other mandatory disclosures incompliance with Chapter 6, Section 6, Annual Accounts Act”.Corporate governance principlesSkanska AB is a Swedish public limited company. Skanska AB’s Series Bshares are listed on the NASDAQ OMX Stockholm. Skanska AB andthe Skanska Group are governed in accordance with the Articlesof Association, the Swedish Companies Act, the NASDAQ OMXStockholm rule book for issuers and other applicable Swedish and foreignlaws and ordinances.Skanska applies the Swedish Code of Corporate Governance(“the Code”), which is available at www.corporategovernanceboard.se. The Group’s most important governing documents, in additionto those based on laws or other statutes, are available on Skanska’swebsite,www.skanska.com.Articles of AssociationThe Articles of Association are adopted by the Annual Shareholders’Meeting and shall contain a number of disclosures of a more fundamentalnature for the Company, among other things what operationsit shall conduct, the size and registered office of the Board of Directors,the size of the share capital, any regulations on different types of sharesand conversion of shares, number of shares and how notice of a Shareholders’Meeting shall be provided. The complete Articles of Associationare available on Skanska’s website.Annual Shareholders’ MeetingAt the Annual Shareholders’ Meeting, Skanska’s shareholders decideon central issues, such as adoption of income statements and balancesheets, the dividend to the shareholders, the composition of the Board,discharging the members of the Board of Directors and the Presidentand CEO from liability for the financial year, amendments to the Articlesof Association, election of auditors and principles of remunerationto senior executives. Shareholders listed in the register of shareholderson the record date who notify the Company of their intention to participatein the meeting are entitled to attend it either personally or byproxy through a representative or substitute.Every shareholder is entitled to have an item of business dealt with atthe Shareholders’ Meeting. Well before notice of the meeting is issued,the Company’s website provides information on how shareholdersshall proceed in order to have an item of business dealt with.The 2011 Annual Shareholders’ MeetingThe Annual Shareholders’ Meeting was held on April 5, 2011 inStockholm. At the Meeting, a total of 643 shareholders were presentpersonally or through proxy, representing about 56.5 percentof the total voting power in the Company. The Meeting re-electedStuart E. Graham, Johan Karlström, Sverker Martin-Löf,Sir AdrianMontague, Lars Pettersson, Josephine Rydberg-Dumont,Charlotte Strömberg and Matti Sundberg as members of the Board ofDirectors. Finn Johnsson resigned from the Board.The Meeting elected Fredrik Lundberg as a new member of theBoard. The Meeting re-elected Sverker Martin-Löf as Chairman of theBoard. The employees were represented on the Board byInge Johansson, Roger Karlström and Alf Svensson as members, withRichard Hörstedt, Jessica Karlsson and Thomas Larsson as deputymembers. All 15 members and deputy members of the Board as wellas the Company’s auditors were present at the Annual Shareholders’Meeting.Among other things, the Meeting approved a dividend to the shareholderstotaling SEK 12.00 per share, of which SEK 5.75 per share as aregular dividend and SEK 6.25 as a conditional extra dividend. Completeinformation about the 2011 Annual Meeting plus minutes of theMeeting are available on Skanska’s website.88 Report of the Directors Skanska Annual Report 2011