In 2005, the NASDAQ OMX Copenhagen A/S adopted a set of recommendations on corporate governance, the contents of which companies are required to consider in accordance with the ‘comply or explain’ principle. The recommendations were updated in 2008. On the basis of these recommendations, the Board of Directors of ALK continuously discusses the general implementation of corporate governance. The general principles for the specific recommendations in the reports have been applied in the Board’s regular work for a number of years. ALK meets the recommendations but has chosen different practices in the following areas:
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ALK does not, as proposed in the recommendations, have any guidelines on how many directorships a board member may hold. What is important is each individual member’s capacity, competences and contribution.
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The recommendations propose that the remuneration paid to Management be disclosed in detail. ALK believes that focus should be on the total remuneration and any increase or decrease in it. The remuneration paid to the Board of Directors and the Board of Management is disclosed in the annual report.
With respect to the other specific recommendations in the reports, the Board of Directors includes these in its considerations on corporate governance to the effect that both the company’s and the other stakeholders’ interests are safeguarded in the best possible way.
General guidelines for the company’s remuneration of members of the Board of Directors and the Board of Management
In accordance with Danish company law, the annual general meeting of ALK shall adopt general guidelines for incentive pay to members of the Board of Directors and the Board of Management. Below is a description of the general principles for the combined remuneration to the Board of Directors and the Board of Management adopted at the annual general meeting of ALK in April 2008. See Incentive Payment for additional details.
Board of Directors
The members of the Board of Directors receive a fixed fee and are not offered any share options, warrants or other incentive plans.
Board of Management
General principles
The Board of Directors believes that a combination of fixed and performance-based compensation to the Board of Management helps ensure that ALK can attract and retain key persons. At the same time, the Board of Management is given an incentive to create shareholder value. The guidelines on remuneration to the Board of Management contain a fixed framework for the variable pay component, thereby safeguarding ALK’s short-term and long-term objectives whilst ensuring that the remuneration structure does not lead to carelessness, unreasonable conduct or acceptance of unnecessary risk.
Remuneration components
The terms of employment and the remuneration of the members of the Board of Management are agreed specifically between each member of the Board of Management and the Board of Directors, and the remuneration will normally include the following components:
a) Fixed salary (‘gross salary’), including pension.
b) Usual non-pay benefits, such as car, phone, newspaper, etc.
c) Cash bonus, see below.
d) Share options, see below.
Cash bonus
Individual members of the Board of Management may receive an annual bonus not to exceed 30% of their gross salaries for the year. The aim of the cash bonus is to ensure fulfilment of ALK’s short-term objectives. Bonus grants and the amount thereof therefore depend on the fulfilment of objectives agreed upon for one year at a time. The objectives primarily relate to the fulfilment of ALK’s budgeted results or the achievement of financial key figures or other measurable individual performance indicators, whether of a financial or non-financial nature.
Share options
Members of the Board of Management are eligible for options. The aim of option grants is to ensure value creation and fulfilment of ALK’s long-term objectives. The option plan is based on shares, and grants may be made annually, usually in connection with the presentation of the Q3 financial statements. The present value at the date of grant of options granted in any one year may not exceed 30% of the employee’s gross salary. Normally, options are exercisable no earlier than three years after grant, and the exercise price of the options may not be lower than the market price of ALK’s shares at, or immediately before, the date of grant. At December 31, 2009, the five members of the Board of Management held a total of 91,450 outstanding options exercisable in the period from January 1, 2009 until November 1, 2016. See note 6 to the financial statements 2009 for additional details.
No agreement has been made with the members of the company’s Board of Management for severance pay exceeding usual severance terms.
Facts on the company’s corporate governance, including information on annual general meetings, management, articles of association, reporting, remuneration and dealings in treasury shares, are available at the company’s website: www.alk-abello.com/investor.