Corporate Governance Statement
The Company’s Corporate Governance Statement as of 31 December 2009 (as approved by the BoD)
The Corporate Governance Statement below is updated on a regular basis (last updated 17 August 2010).
Table of Contents
- The rules on Corporate Governance the Company follows
- Departures from the Icelandic guidelines on Corporate Governance
- Description of the main aspects of internal controls and the Company‘s risk management in connection with the preparation of financial statements
- The Company‘s values, code of ethics and social responsibility policy
- Description of the composition and activities of the Board of Directors and its sub-committees as well as the Executive Management
- Arrangement of the appointment of sub-committee members
- Information on the number of Board Meetings and sub-committee meetings as well as their attendance
- Access information for the written rules of procedure for the Board of Directors and its sub-committees
- Information on Board Members
- Information on which Board Members are independent of the Company and its major shareholders
- Principal aspects in the Board of Directors‘ performance assessment
- Information on the Company’s CEO and a description of his main duties
- Information on violations of laws and regulations that the appropriate supervisory or ruling body has determined
- Arrangement of communications between shareholders and the Board of Directors
- Analysis of environmental factors and social factors
1. The rules on Corporate Governance the Company follows
The Company follows the Icelandic Guidelines on Corporate Governance issued in June 2009 by the Iceland Chamber of Commerce, the Confederation of Icelandic Employers and NASDAQ OMX Iceland in accordance with Clause 2.25.3 in the Rules for issuers of financial instruments on NASDAQ OMX Iceland issued in July 2008. The Guidelines can be found on the website of the Iceland Chamber of Commerce, www.chamber.is.
According to Clause 4.3 in the Rules for issuers of shares on NASDAQ OMX Copenhagen, issued in July 2008, the Company is not subject to the Danish Recommendations for Corporate Governance, issued in December 2008 by the Danish Corporate Governance Committee. However, the Company‘s aim is to be in general compliance with the Recommendations. The Recommendations can be found on the website of the Danish Corporate Governance Committee, www.corporategovernance.dk.
2. Departures from the Icelandic guidelines on Corporate Governance
In general, the Company is in compliance with the Icelandic Guidelines on Corporate Governance.
The Board of Directors has not issued a specific written code of ethics and social responsibility for the Company but plans to do so. See further information in item 4 below.
The Board of Directors evaluates at least once a year the performance of the CEO, but not specifically the performance of other members of the Executive Management. The CEO hires the other members of the Executive Management and is responsible towards the Board for their performance. The CEO evaluates at least once a year the performance of the members of the Executive Management. See further information in item 11 below.
The Board of Directors has not established a nomination committee and abolished the remuneration committee in 2010. In the Board‘s opinion such committees are currently not necessary taking into account the size of the Board and the balanced and relevant expertise and experience of the current Board Members.
3. Description of the main aspects of internal controls and the Company‘s risk management in connection with the preparation of financial statements
External audit
An auditing firm is elected at the Annual General Meeting for a term of one year. The auditors are not allowed to own shares in the Company. The auditor shall examine the Company’s annual accounts in accordance with international standards on auditing, and shall, for this purpose, inspect account records and other material relating to the operation and financial position of the Company. The auditors shall at all times have access to all of the Company’s books and documents. The auditor reports any significant findings regarding accounting matters and any significant internal control deficiencies via the Audit Committee to the Board in the Audit Memorandum.
Internal control
Össur’s risk management and internal controls, in relation to financial processes, are designed with the purpose of effectively controlling the risk of material misstatements. The Company designs its processes to ensure that there are no material weaknesses in the internal controls that could lead to a material misstatement in its financial reporting. The auditor‘s evaluation of these processes are included in the Audit Memorandum.
4. The Company‘s values, code of ethics and social responsibility policy
The Company’s values
Össur’s values; Honesty, Frugality, and Courage, are a strong foundation for the Company’s corporate culture. The values are guidelines for how employees should behave. These values are considered when hiring, enabling Össur to build a company with employees who are responsible citizens and strong representatives of Össur. The Company’s goal is to be accountable for its impact on the society and environment and the strong values within the Company since its foundation underpin the socially responsible focus within Össur.
Code of conduct
Össur has always placed a great emphasis on fair operating practices. Since 2005, Össur has outsourced part of its manufacturing to Asia. Össur and its preferred manufactures are instructed to follow a specific code of conduct, and all contracts with manufactures include certain clauses the manufacturers have signed to honor and respect the specific standard of conduct. The Company also performs audits on regular basis to make sure that the code of conduct is honored by the manufacturers. See below the basis of the code of conduct to be honored:
Child labor
Does not employ any person under the minimum age established by local law or the age at which compulsory schooling has ended, whichever is greater, but in no case under the age of 14.
Compensation
Certifies that it pays at least the minimum total compensation required by the locals, including all mandated wages, allowances and benefits.
Hours of work
Provides one day off in seven and requires no more than 60 hours of work per week or complies with local limits if they are lower.
Health and safety
Certifies that it has written health- and safety guidelines including those applying to employee residential facilities, where applicable.
Corporate Social Responsibility
Össur has always strived to be responsible for its actions and activities. In May 2008, Össur was one of the founders of a center for social responsible companies in Iceland. Since 2008 Össur has increased its focus on CSR projects and has evaluated the status of CSR within the different departments of the Company. The Company’s management realizes that enhancing social responsibility within the Company requires patience and long-term vision. Going forward Össur will consider using recognized reporting standards that set out principles and indicators, which the Company can use to measure and report its economic, environmental, and social performance. Össur’s goal is to be accountable for its impact on society and the environment through its products, manufacturing and other related activities.
Training and support
Great emphasis is on communicating the Company‘s business ethics, based on the Company’s values, to the staff. The CEO and management participate in presenting and discussing this with current and new employees. This is seen as very important guidance to the employees.
5. Description of the composition and activities of the Board of Directors and its sub-committees as well as the Executive Management
Board of Directors
The Board is currently composed of five members, each elected at the Annual General Meeting for a term of one year. Board Members elect a Chairman and Vice-Chairman from their own ranks.
The Board is the supreme authority in the affairs of the Company between Shareholders‘ Meetings.
The Board shall operate in accordance with the Company‘s Articles of Association and the Board‘s Rules of Procedure. The principal duties of the Board are the following:
- Appoint a CEO and decide on his salary and the terms of his employment, establish his terms of reference and supervise his work.
- Supervise continuously and precisely all aspects of the Company's operations and ensure that the Company's organization and activities are always in good and proper order. In particular, the Board of Directors shall ensure adequate supervision of the accounts and disposal of the Company’s financial assets and at least once a year confirm the Company‘s operating plan and budget.
- Establish goals for the Company in accordance with the Company's objectives pursuant to the Articles of Association and formulate the policy and strategy required to achieve these goals.
The presence of the majority of Board Members at Board Meetings constitutes a quorum. Important decisions, however, may not be taken unless all Board Members have had the opportunity to discuss the matter, if possible. All matters brought before a Board Meeting shall be decided by a simple majority. In the event of an equality of votes, the Chairman of the Board shall cast the deciding vote.
Audit Committee
The Audit Committee is composed of all the Board Members.
The Audit Committee is only acting as an advisor to the Board and has no authority to take any decision on behalf of the Board.
The Audit Committee shall operate in accordance with its Rules of Procedure. The principal duty of the Audit Committee is to ensure the quality of the Company‘s Consolidated Financial Statements and other financial information and the independence of the Company‘s Auditors.
Executive Management
The Executive Management is composed of the CEO and five other members.
Jón Sigurdsson, President & CEO, is responsible for the day-to-day operation of the Company. Further information on the CEO and his duties can be found in item 12 below.
Other Members of the Executive Management:
Egill Jónsson, Vice President of Manufacturing and Operations.
Hilmar Bragi Janusson, Vice President of Research and Development.
Hjörleifur Pálsson, CFO.
Mahesh Mansukhani, President of Össur Americas.
Ólafur Gylfason, Managing Director of Össur EMEA.
The Executive Management generally holds meetings once a week.
6. Arrangement of the appointment of sub-committee members
Sub-committee members are appointed by the Board of Directors for a term of one year.
The Audit Committee is composed of all the Board Members, unless the Board of Directors decides otherwise. The majority of the Audit Committee shall be independent of the Company, the Executive Management and the Company‘s Auditor. At least one member shall be independent of major shareholders. The Members of the Audit Committee shall possess the knowledge and expertise needed to perform the tasks of the Audit Committee. At least one member shall have solid knowledge and experience in the field of financial statements or auditing.
7. Information on the number of Board Meetings and sub-committee meetings as well as their attendance
The Board of Directors had nine Board Meetings in 2009 and has had four meetings in 2010. The Audit Committee and the Remuneration Committee had one meeting each in 2009. All the meetings in 2009 and 2010 have been fully attended, except for two Board Meetings in 2010 which were attended by four of the five Board Members.
8. Access information for the written rules of procedure for the Board of Directors and its sub-committees
The rules of procedures for the Board of Directors and the Audit Committee can be found on the Company‘s website: www.ossur.com/investors
9. Information on Board Members
Niels Jacobsen, Chairman of the Board of Directors, born 1957, residing in Denmark. He became a Board Member in 2005 and has been the Chairman of the Board since 2006. Mr. Jacobsen is president and CEO of William Demant Holding A/S, a Danish industrial group in the hearing healthcare field. Previous positions include president of Orion A/S and vice president in corporate affairs for both Atlas Danmark A/S and Thrige-Titan A/S. Mr. Jacobsen is also a board member of a number of Danish companies and organizations, including LEGO A/S (chairman), KIRKBI A/S (vice chairman), A.P. Møller Mærsk A/S and he holds directorships in a number of wholly and partly owned companies in the William Demant Group, including Oticon A/S (chairman), William Demant Invest A/S (chairman), Sennheiser Communications A/S (chairman), HIMPP A/S (chairman), HIMSA A/S (chairman) and HIMSA II A/S. Furthermore, he holds a seat on the central board of the Confederation of Danish Industries. Mr. Jacobsen has a MSc degree in Economics from the University of Aarhus in Denmark. He and his related parties hold 107,500 shares in the Company, but he holds no share options in the Company. Mr. Jacobsen is chairman of the board of William Dement Invest, the Company’s largest shareholder, which holds 168,694,203 shares in the Company. He has no interest links with the Company’s main clients or competitors.
Thórdur Magnússon, Vice Chairman of the Board of Directors, born 1949, residing in Iceland. He became a Board Member in 2005 and has been the Vice Chairman of the Board since 2006. Mr. Magnússon is the chairman of the investment company Eyrir Invest. He is also a board member of numerous Icelandic companies, including the retail companies Byko, Kaupás and Norvik and is chairman of the board of Marorka, an energy-efficiency systems company, as well as Calidris and Handpoint. Mr. Magnússon is also a member of the board of the Iceland Chamber of Commerce and University of Reykjavík. Mr. Magnússon was CFO at Eimskip for over 20 years. He has a Business degree from the University of Iceland and holds an MBA from the University of Minnesota in the United States. Mr. Magnússon and related parties hold 8,456 shares in the Company, but he holds no share options. Mr. Magnússon is chairman of the board and a major shareholder in Eyrir Invest, the Company’s second-largest shareholder, which holds 68,540,215 shares in the Company. He has no interest links with the Company’s main clients or competitors.
Arne Boye Nielsen, Member of the Board of Directors, born in 1968, residing in Denmark. He became a Board Member in 2009. Mr. Nielsen has spent his entire career with William Demant Holding A/S in various and expanding roles throughout the world. After working as a management assistant to Mr. Niels Jacobsen and as an interim general manager of Oticon Australia Pty Ltd., Mr. Nielsen assumed in 1996 his current position as President of Diagnostic Instruments which has operations worldwide. In 2003 he became a member of the management group in William Demant Holding A/S. Mr. Nielsen is a member of the board of Sennheiser Communications A/S and Phonic Ear A/S as well as president of Interacoustics A/S and director of Maico Diagnostic in Berlin, Germany. Mr. Nielsen has a BSc degree and a MSc degree in Business Administration from the Copenhagen Business School in Denmark. He neither has shares nor share options in the Company. Mr. Nielsen was nominated to the Board by William Demant Invest, the Company’s largest shareholder. He has no interest links with the Company’s main clients or competitors.
Kristján Tómas Ragnarsson, Member of the Board of Directors, born in 1943, residing in the United States. He became a Board Member in 1999. Mr. Ragnarsson is chairman and Lucy G. Moses professor at department of rehabilitation medicine at Mount Sinai School of Medicine, New York, United States. He is a specialist in physical medicine and rehabilitation, certified by the American Board of Physical Medicine and Rehabilitation and has been practicing physician and academician for more than 40 years. Mr. Ragnarsson is currently an executive trustee of the American Scandinavian Foundation, president of the Association of Academic Physiatrists and vice president of the Foundation for Physical Medicine and Rehabilitation. Previous positions include president of American Spinal Injury Association, chairman of the board of governors Mount Sinai Faculty Practice Associates and trustee at the Mount Sinai Hospital. Mr. Ragnarsson graduated as a medical doctor from the School of Medicine of the University of Iceland. Mr. Ragnarsson and related parties hold 623,789 shares in the Company, but he holds no share options. Mr. Ragnarsson has no interest links with the Company’s main clients, competitors or major shareholders.
Svafa Grönfeldt, Member of the Board of Directors, born in 1965, currently residing in the United States. She became a Board Member in 2008. Ms. Grönfeldt is the Chief Organizational Development Officer of Alvogen, an American generic pharmaceutical company. Previous positions include president of Reykjavík University, deputy to the CEO of Actavis Group hf., assistant professor in the Faculty of Economics and Business Administration at the University of Iceland and managing director and managing partner of IMG Gallup/Deloitte. Ms. Grönfeldt holds a doctorate in industrial relations from the London School of Economics. She neither holds shares nor share options in the Company. Ms. Grönfeldt has no interest links with the Company’s main clients, competitors or major shareholders.
10. Information on which Board Members are independent of the Company and its major shareholders
The Board of Directors has made an assessment on which Board Members are independent according to the Icelandic Guidelines on Corporate Governance. All the Board Members are considered independent of the Company and two of them, Kristján Tómas Ragnarsson and Svafa Grönfeldt, are also independent of the Company‘s major shareholders.
11. Principal aspects in the Board of Directors‘ performance assessment
At least once a year the Board of Directors evaluates the Board and its sub-committees‘ work, practices, size and composition, as well as the contribution of each Board Member. The Board‘s aim is to discharge its duties in an efficient manner with integrity in the best interest of the Company. The Board evaluates its work in general, including whether important matters have been well prepared and discussed in a constructive way within the Board. When evaluating its size and composition, the Board e.g. takes into account the Company‘s operations, policies and practices and the knowledge, experience and expertise of each Board Member.
The Board also evaluates the work and results of the CEO each year according to previously established criteria, including whether the CEO has prepared and carried out a business strategy which is consistent with the established goals.
The Chairman of the Board is in charge of the evaluation processes. The Chairman may seek external assistance as he deems appropriate. The Board discusses the results of the assessments and decides which actions are to be taken, if any.
The CEO is responsible for the work and results of the Executive Management. At least once a year the CEO evaluates the work and results of the Executive Management according to previously established criteria. The CEO discusses the results of the assessment with each member of the Executive Management and decides which actions are to be taken, if any.
At least once a year the Chairman and the CEO have a meeting to discuss the results of the Board’s assessment of the CEO’s work and results and the proposed actions be taken, if any. The CEO informs the Chairman of the results of his evaluation of the Executive Management and which actions will be taken, if any. The Chairman shall inform the Board of the discussions with the CEO as he deems necessary and appropriate.
12. Information on the Company’s CEO and a description of his main duties
Jón Sigurdsson, President & CEO, born 1956, temporarily residing in the United States. He was appointed CEO in April 1996. He is a board member of the Iceland Chamber of Commerce, Confederation of Icelandic Employers and Alcan in Iceland. Mr. Sigurdsson was the Commercial Counsellor for the Icelandic Trade Council in New York (1992-1996), Chief Financial Officer at Álafoss (1989-1991), Head of the International Division of Eimskip (1986–1989) and an Engineer for Bang and Olufsen Denmark (1982–1984). He has a BSc degree in Industrial Engineering from Odense Technical College in Denmark and a Master’s degree in Business Administration (MBA) from the United States International University in San Diego, United States. Mr. Sigurdsson and his related parties hold 135.158 shares in the Company and he has a stock option for 1.250.000 shares. He has no interest links with the Company’s main clients, competitors or major shareholders.
The principal duties of the CEO are the following:
1. He is responsible for daily operations and is obliged to follow the Board’s policy and instructions in that regard. The daily operations do not include measures which are unusual or extraordinary. The CEO may only take such measures if specially authorized by the Board, unless it impossible to wait for the Board’s decision without substantial disadvantage to the Company’s operations. In such an event the CEO shall inform the Board of his/her measures, without delay.
2. He shall normally act as chairman in the Company’s subsidiaries which are connected with the sales and manufacturing activities and/or the core activities of the Company.
3. He is responsible for the work and results of the Executive Management. See further information in item 11 above.
4. He shall ensure that the Consolidated Financial Statements of the Company conform to the law and accepted practices and that the treatment of the property of the Company is secure. The CEO shall provide any information that may be requested by the Company’s Auditors.
13. Information on violations of laws and regulations that the appropriate supervisory or ruling body has determined
No violations of laws and regulations were determined in 2009 or have been determined in 2010 by supervisory or ruling body.
14. Arrangement of communications between shareholders and the Board of Directors
In accordance with the Company’s Articles of Association and the Icelandic Companies Act, the primary communication between shareholders and the Board of Directors is at the Annual General Meeting and other Shareholders’ Meetings. Shareholders have e.g. the right to put items on the agenda of Shareholders’ Meetings and submit proposals.
To maintain a consistent and direct dialogue with shareholders, the Board has approved an Investor Relations Policy, available on the Company’s website: www.ossur.com/investors
The objective of the Investor Relations Policy is to disclose financial and corporate information providing investors, analysts and other stakeholders with comprehensive and accurate information to improve the understanding of the current and expected future of Össur. Össur’s communication to shareholders and the market shall be in compliance with relevant regulatory bodies at all times and disseminated via a recognized distribution vehicles.
15. Analysis of environmental factors and social factors
The Company’s Annual Report contains analysis of environmental factors and social factors that help to understand the development, success and position of the Company. The Annual Report is available on the Company’s website: www.ossur.com/investors