Board of Directors: Composition and responsibilities
In accordance with Danish legislation, Novozymes has a two-tier management system comprising the Board of Directors and the Executive Leadership Team, with no individual being a member of both.
Novozymes’ Articles of Association require the Board of Directors to have four to eight members elected at the Annual Shareholders’ Meeting. Currently, the Board has seven members. They are elected for one year at a time and cannot be elected or re-elected after reaching the age of 70. Nominations are based on an evaluation of factors such as competencies, diversity, independence and prior performance. The Board of Directors also includes three members elected by employees, who serve four-year terms.
The Board of Directors is accountable to the company’s shareholders for the way the company conducts its business. The composition of the Board of Directors must therefore be such that the combined competencies of the Board enable it to inspire, guide and oversee the company’s development, and diligently address and resolve the issues and challenges faced by the company at any time.
In order to secure the right competencies and promote diversity, the following targets have been set for the composition of the Board of Directors:
- At least half of the shareholder-elected board members shall be independent as defined in the Danish Recommendations on Corporate Governance.
- At least 40% of the shareholder-elected board members shall have substantial international experience from the management of large corporations or institutions headquartered outside Denmark.
- One-third or more of the shareholder-elected board members shall be female, and one-third or more of the shareholder-elected board members shall be male.
All targets were met in 2015, and the third bullet fulfills the requirements of section 99b of the Danish Financial Statements Act, based on the Danish Business Authority’s interpretation of section 139a of the Danish Companies Act that the target number of individuals should be rounded to the nearest integer.
The required competencies are defined in a competency profile that specifies various personal characteristics, skills and experience. The individual competencies of the members of the Board of Directors are shown in the presentation of the Board of Directors and Executive Leadership Team.
The Board’s main responsibilities are to:
- Ensure the right management and organizational structure
- Supervise financial, social and environmental performance and the Executive Leadership Team’s day-to-day running of the company
- Decide the overall management and strategic development of the company
A Chairmanship has been established in accordance with the Articles of Association and the Rules of Procedure for the Board of Directors. It has two members – the Chairman and the Vice Chairman – and is responsible for assisting the Board of Directors in matters concerning the Executive Leadership Team’s remuneration and nomination, and for overseeing the Executive Leadership Team’s day-to-day running of the company and reporting back to the Board of Directors. The Chairmanship is also responsible for planning and preparing meetings of the Board of Directors, preparing material for the nomination of candidates for election to the Board of Directors, and recommending remuneration for the Board of Directors and the Executive Leadership Team.
In addition, the Board of Directors has an Audit Committee that assists the Board of Directors in monitoring aspects relating to accounting, auditing, internal control and financial reporting.
As part of the internal control system, all identified fraud cases and concerns raised are investigated and reported to the Audit Committee. 12 cases of substantiated fraud were reported in 2015. Sanctions included dismissal of employees, reporting to the police and other disciplinary sanctions.
Charters and recommendations
In laying down the management principles for Novozymes, the Board of Directors has followed the Recommendations on Corporate Governance that form part of the disclosure requirements applicable to companies listed on Nasdaq Copenhagen. These recommendations are available at corporategovernance.dk. A detailed review of Novozymes’ position on all of the recommendations and a description of the internal control and risk management system relating to financial reporting can be found in the statutory report on corporate governance pursuant to section 107b of the Danish Financial Statements Act.
The recommendations require companies to explain any noncompliance. Novozymes follows 43 of 47 recommendations, the exceptions being:
- Nomination and remuneration committees have not been set up. Instead, these responsibilities are laid down in the Charter for the Chairmanship (Recommendations 3.4.6 and 3.4.7)
- The remuneration policy for the Executive Leadership Team contains no specific clause that pertains to the repayment of variable remuneration components paid on the basis of misstated information, as Novozymes considers the rules in Danish law to be sufficient in such cases (Recommendation 4.1.2)
- Due to the limitations imposed by the Novo Nordisk Foundation’s Articles of Association and Novozymes’ ownership structure, the Board of Directors reserves the right in certain circumstances to reject takeover bids without consulting shareholders (Recommendation 1.3.1)
Furthermore, under the Danish Financial Statements Act (section 99a and section 99b) it is mandatory for large companies to report on corporate responsibility and equal opportunities. As a member of the UN Global Compact, Novozymes prepares a Communication on Progress, which is available under Supplementary. Together with the integrated financial, environmental and social reporting, the Communication on Progress meets both the requirements for reporting on corporate responsibility and equal opportunities, and the UN Global Compact’s advanced reporting criteria.
Novozymes also works within the parameters of Touch the World, a document outlining the company’s values and commitments, and has committed to principles derived from the UN Global Compact and the UN Convention on Biological Diversity.
Other Board-related information
The Board of Directors held seven meetings in 2015, with an overall attendance rate of 94%.
Any changes to the Articles of Association require that shareholders representing at least two-thirds of the total number of votes in the company are represented at the Shareholders’ Meeting, and that at least two-thirds of the votes cast, as well as two-thirds of the voting capital represented at the meeting, are in favor of the proposal to change the Articles of Association. The Annual Shareholders’ Meeting has authorized the Board of Directors to allow the company to acquire treasury stock on an ongoing basis to the extent that the nominal value of the company’s total holding of treasury stock at no time exceeds 10% of its share capital, cf. section 198 of the Danish Companies Act. The purchase price must not deviate by more than 10% from the price quoted on Nasdaq Copenhagen on the date of acquisition. The authorization applies until March 1, 2017. In addition, the Board of Directors has been authorized to increase the share capital. The authorization applies until March 2, 2018.
Each year, one of the responsibilities of the Board of Directors is to assess whether the capital and share structure in Novozymes is optimal. The Board of Directors remains of the opinion that the share structure with A and B common stock is the best way to safeguard Novozymes’ long-term strategy and development to the benefit of the company’s shareholders and other stakeholders. Regarding capital structure, Novozymes will continue to favor a conservative balance sheet, reflected by a target for net interest-bearing debt of 0-1x EBITDA. This target was met in 2015.
Novozymes is party to a number of partnership contracts that can be terminated by the other party in the event of significant changes in the ownership or control of Novozymes. A few contracts contain provisions that restrict Novozymes' licenses to use specific forms of technology in such situations.