In guiding the development of the company, the Board focused on strategy and financial targets in 2006. In addition, the Board monitored the company’s programme for change and improved efficiency and dealt with issues concerning recruitment, organisational changes and long-term investment requirements.
Swedish code of corporate governance
This report about corporate governance in the Billerud Group is organised in accordance with rules contained in the Swedish code of corporate governance. This code was introduced during the spring of 2005. The company also follows the rules contained in the listing requirements of the Stockholm Stock Exchange, which from 1 July 2005 require that companies must comply fully with the Swedish code of corporate governance. This report has not been checked by the company’s auditors.
Corporate Governance Policy for Billerud
A summary of implementation of the Swedish code of corporate governance as of 2006 is presented below.
- Annual general Meeting: The code has been implemented
- Nominations committee: The code has been implemented with the following exceptions.
- 2.1. Chairman of the Board or other Board member shall not be chairman of the nominations committee
The 2006 AGM decided that the chairman of the nominations committee shall be the Board member representing the largest shareholder in terms of numbers of shares. The largest shareholder of Billerud is Michael M.F. Kaufmann, Board member and vice chairman of the Board.
- The Board: The code has been implemented with the exception that no assurance was made in accordance with point 3.6.2.
- Company management: The code has been implemented
- Corporate governance: The code has been implemented
Read the complete table
Ownership structure and shares
At the end of 2006 the total number of shareholders was 151,762, compared with 160,274 at the end of the previous year. The portion of foreign ownership increased to 42.7% (34.4) excluding shares bought back and owned by the company (1,910,000). The other owners are private Swedish individuals, 41.0% (47.1), and Swedish legal entities, 16.3%(18.5).
Read more about the Shares
Read more about the Shareholder structure
Annual General Meeting (AGM), etc
Nomination and election process
At the 2002 AGM the Chairman of the Board announced that a nominations committee would be introduced. The committee was formed by the Chairman contacting larger shareholders during the autumn before the AGM to establish three shareholders willing to be members of the nominations committee. Committees set up according to this procedure worked ahead of the AGMs for 2003-2006 and presented candidates for election to the Board and the position of auditor. They also proposed fees for Board members and auditors. Ahead of the 2005 AGM the name of the nominations committee was changed to elections committee.
The 2006 AGM
The elections committee for the 2006 AGM comprised Cecilia Lager, SEB fonder and SEB Trygg Liv, chairwoman, Michael M.F. Kaufmann, Frapag Vermögensverwaltung, and Torsten Johansson, Handelsbanken Kapitalförvaltning. Ingvar Petersson, Chairman of Billerud AB, is secretary and convenor, but not a member of the committee.
The committee had received an internal assessment of Board members and the work of the Board in 2005.
No special remuneration will be paid to the chairman or any other members of the elections committee for their work.
The three owner representatives represent around 20% of the votes in Billerud.
The elections committee held three minuted meetings and kept in contact via telephone and e-mail. Billerud’s website contains a page entitled ”Elections committee” within the section on ”Corporate governance”, where shareholders are able to communicate with the elections committee, however no communication has taken place.
The 2006 Annual General Meeting was held on 3 May 2006 at Aula Magna, Stockholm University. Shareholders representing 26.3% of the share capital were present at the meeting. The meeting agreed upon a dividend of SEK 3.25 per share for the 2005 financial year. The meeting agreed to re-elect Ingvar Petersson, Gunilla Jönson, Per Lundberg, Michael M.F. Kaufmann, Yngve Stade and Meg Tivéus as ordinary Board members and to elect Ewald Nageler as a new Board member. Björn Björnsson and Mats Pousette did not stand for re-election. Ingvar Petersson was re-elected as Chairman of the Board, and Michael M.F. Kaufmann as vice Chairman.
The 2007 AGM
The 2006 AGM decided to set up an elections committee ahead of the 2007 AGM that would follow the same procedures previously used. The elections committee would be appointed by the Chairman, who would contact the larger shareholders during the autumn of 2006. The elections committee would then make proposals regarding a chairman for the AGM, Board members, Chairman of the Board and fees for Board members and auditors. The committee will also make proposals for appointing the elections committee ahead of the 2008 AGM.
On 26 October 2006 an elections committee for the 2007 AGM was appointed comprising Cecilia Lager, SEB fonder and SEB Trygg Liv, chairwoman, Michael M.F. Kaufmann, Frapag Vermögensverwaltung, and Jan Andersson, Robur Fonder. Ingvar Petersson, Chairman of Billerud AB, is secretary and convenor, but not a member of the committee. No special remuneration will be paid to the chairman or any other members of the elections committee for their work.
The three owner representatives represent around 24% of the votes in Billerud.
The elections committee held three minuted meetings and kept in contact via telephone and e-mail. Billerud’s website contains a page entitled ”Elections committee” within the section on ”Corporate governance”, where shareholders are able to communicate with the elections committee, however no communication has taken place.
The elections committee has received an external assessment of the work of the Board. This included an interview with each Board member in which they were invited to make observations about the work of the Board in 2006. The elections committee has also made an assessment of which competences should be represented on the Board of a company such as Billerud and made a comparison with the current Board.
The 2007 AGM will take place on 3 May 2007 at Aula Magna, Stockholm University.
The Board of Directors
Composition
In accordance with the articles of association, the Board of Directors of Billerud AB comprises at least six members and at most ten members, with at most six deputies. In accordance with the law on Board representation for private employees, the trade unions have the right to appoint two members. This limits the number of Board members appointed by the AGM to at most eight ordinary members. Board members are appointed for one year at a time. The company’s CEO is not a member of the Board.
Of Board members elected by the AGM, all except two members are independent of the company, senior executives and the larger shareholders. Michael M.F. Kaufmann is the CEO and Ewald Nageler is the CFO of the parent company of Frapag Vermögensverwaltung GmbH, Billerud AB’s largest shareholder, and are therefore not independent of the company’s owners according to the definitions of the Swedish code of corporate governance and the listing requirements of the Stockholm stock exchange.
The Board also includes four members, of whom two are deputies, who are appointed by the trade unions in accordance with the law on Board representation for private employees. These four Board members are employees of the company and are not therefore independent of the company.
During 2006 the secretary of the Board has been Wilhelm Lüning of the Cederquist legal firm.
All Board members have completed training courses for Board members of listed companies arranged by the Stockholm Stock Exchange.
Read more about the Billerud Board of Directors
Organisation of the work of the Board
The work of the Board follows written instructions and a meetings schedule, which aims to ensure that the Board receives comprehensive information and that all aspects of the company’s activities are dealt with. The written instructions prescribe the information to be supplied to the Board. These instructions are available on the company’s website.
The Board has also established a number of general policies for the company’s activities. These policies are revised as necessary. They include policies on corporate governance, finance and communications and a single policy covering quality, the environment and the community. The latter policy covers Billerud’s attitudes towards ethics and the environment.
The Board has two committees, an audit committee established in 2004 and a compensations committee established in 2001. The roles, composition and activities of these committees in 2006 are presented below.
The Board has also established instructions for the CEO which give the CEO authorisation to represent Billerud and sign on the company’s behalf concerning current activities, with exceptions for transactions of an extraordinary nature or of significant importance. These instructions are updated annually and are available on the company’s website.
Rule of Procedures for the Billerud Board of Directors
Read more about fees, attendance etc
Audit committee
The Board is ultimately responsible for ensuring that satisfactory controls are in place for risk management, accounting, financial reporting and similar issues. To support the Board in their supervising role the Board decided in 2004 to set up a special audit committee. This committee is a part of the Board.
The audit committee’s role is to contribute to a good standard of financial reporting and ensure that efficient and independent auditing of the company is performed by qualified, external auditors. The committee shall furthermore monitor the accounting principles, risk management and internal controls of the company. Finally, the committee shall organise the election of the auditors and their fees. The rules of procedure for the audit committee are presented in full on the company’s website.
The audit committee comprises the following four members: Per Lundberg (chairman), Gösta Brink, Ingvar Petersson and Meg Tivéus. All members are independent of the company except for Gösta Brink, who is a Billerud employee. During 2006 the secretary of the committee was Wilhelm Lüning of the Cederquist legal firm.
Work instructions for the Audit Committee
Work in 2006
During 2006 the audit committee held ten meetings, of which four were telephone conferences. Attendance of members of the committee is presented on this page. During the year the committee addressed various auditing issues, the audit plans for 2006, risk analysis, internal controls, matters relating to the introduction of the Swedish code of corporate governance, the Long Term Incentive Programme and policy issues. The committee also met ahead of the publication of each interim report and the financial statement and addressed the accounting and reporting issues relating to publication.
The chairman of the audit committee reports regularly to the Board concerning the audit committee meetings. The Board’s work on internal controls for financial reporting is presented in a report that includes an assessment of the need for a special verification system.
Auditors
At the 2005 AGM authorised public accountants Caj Nackstad and Owe Wallinder were re-elected as auditors and Thomas Nilsson and Hans Åkervall were re-elected as deputy auditors. All four auditors are from the accountancy firm, KPMG. Caj Nackstad and Owe Wallinder have been Billerud’s auditors since 2001. Thomas Nilsson and Hans Åkervall have been deputy auditors since 2003.
Concerning the auditors’ work for other companies, see page 89. In 2006 Billerud’s auditors received around MSEK 5.0 in fees and payments for costs, of which MSEK 2.0 was specifically for the audit. Other assignments were primarily consultation on accounting and taxissues, and work connected with the adoption of IFRS issues. According to established guidelines, other accountancy firms should be commissioned for assignments not relating to the audit. Other accountancy firms have been commissioned in connection with discussions concerning acquisitions.
In order to ensure that the work of the Board and the audit committee is performed in a structured way, and to meet the Board’s information requirements, Billerud’s auditors report directly on at least three occasions per year to the Board and to the audit committee. In 2006 the auditors made reports on three occasions to the audit committee and on one occasion to the Board. These reports dealt with the audit plans, the results of the audit based on the September accounts, and the results of the audit of the annual accounts.
Read more about the Auditors of Billerud
Compensations committee
The Board has established a compensations committee charged with the task of proposing general policy for salaries, remuneration and other general employment terms within Billerud, and to approve the CEO’s proposal for salaries and remuneration for senior executives within the framework of the policy. The committee also makes proposals to the Board and takes decisions regarding the salary and remuneration to the CEO. The rules of procedure for the compensations committee are available on the company’s website.
The committee comprises Ingvar Petersson, (Chairman), Michael M.F. Kaufmann and Per Lundberg. The head of human resources, Anna-Lena Nyberg, was the secretary up to her retirement on 30 June 2006, but was not a member of the committee. From 1 August 2006 the new head of human resources, Cecilia Lundin, became secretary. The committee met three times in 2006. Attendance of members of the committee is presented on page 85 in the Annual Report 2006.
Work instructions for the Compensations committee
Work in 2006
In 2006 discussions were held concerning profit-sharing principles, employment terms for the new CFO and head of human resources, bonus outcomes for 2005, a salary review for 2006 and 2007 for senior executives and the bonus criteria for senior executives in 2007. The principles for remuneration to the CEO and other senior executives, and the actual figures are contained in note 24 in Annual Report 2006.
CEO and senior executives
The CEO is responsible for the day-to-day management of the company in accordance with instructions established by the Board. These instructions are presented in full on the company’s website. The CEO also acts as the chairman of the senior management team.
Work instructions for the CEO
Up to 28 February 2006 the senior management team comprised the managers of the three Swedish mills, the CFO and the director for human resources and information. Three business area managers were added to this team on 1 March 2006.
Read more about the Senior Management Team
The senior management team normally meets once a week, with face-to-face meetings and telephone conferences in alternating weeks. During 2006 the senior management team discussed an organisation review and job lay-offs, energy issues and the ongoing energy project, market and pricing issues, environmental and licensing issues, investments and staff issues. Executives also report on projects in their areas of responsibility. A situation report is also presented at each meeting for each unit within the Group, along with current financial reports. At the end of 2005 the Board decided to introduce in stages an organisation based on business areas.
Illustration of Billerud’s organisation
Activities are divided into three business areas: Packaging & Speciality Paper, Packaging Boards and Market Pulp, with each business area being responsible for sales, marketing and development within their product area.
The business areas also have responsibility for financial results, based on pre-calculated production costs. The Billerud mills are responsible for production and efficiency, upon which their responsibility for financial results is based.
The senior management team has organised a number of Group-wide networks, or committees, in which a member of the team acts as co-ordinator and chairman. Representatives of the three Swedish mills participate on all committees. The following committees were active in 2006:
Technology committee; Anders Snell
Finance managers committee: Nils Lindholm to 30 March 2006. Bertil Carlsén from 1 April 2006
R&D committee; Stina Blombäck
Purchasing committee Per Lindberg
IT committee; Nils Lindholm to 30 March 2006. Bertil Carlsén from 1 April 2006
Human resources committee; Anna-Lena Nyberg 20 30 June 2006. Cecilia Lundin from 1 Aug 2006
Principles for remuneration of senior executives
The 2006 Annual General Meeting adopted as a principle that remuneration and employment terms should be market-based. Work performed shall be remunerated with a fixed salary. In addition a variable bonus may be offered as a reward for achieving fixed targets, see also note 24 on page 76 in Annual Report 2006.
For the complete decision concerning the principles for remuneration see the minutes of the 2006 AGM, supplement 3
Report on internal controls
The report on internal controls is produced in accordance with the Swedish code of corporate governance and the transition rules announced by the Swedish Corporate Governance Board on 15 December 2005. This means that the report is limited to a description of how internal controls for financial reporting are organised. For practical reasons the report has been integrated with the report on corporate governance for 2006.
Control environment
Efficient internal controls are the basis for the proper functioning of the Board. The rules of procedure for the Board and Board committees, and the instructions for the CEO aim to establish clear division of roles and responsibility in order to ensure efficient management of the company’s risks. Furthermore the Board has established a series of guidelines for internal controls, such as accounting and reporting instructions, the finance policy, financial goals and decisions about a suitable organisation, including the senior management team. The senior management team reports regularly to the Board based on fixed procedures. In addition there are reports from the audit committee.
The senior management team is responsible for ensuring that the necessary internal controls are performed for the management of significant risks in day-to-day activities. These include guidelines for how the individual employee shall understand his or her role in maintaining good internal controls.
Risk assessment and controls
The company uses a model for assessing the risk of errors in financial reporting. The company continually monitors items where there is special risk for error. This work was performed in 2006 and described in notes 23 and 31 of the annual report 2006. Special attention was paid to designing controls for preventing and discovering errors in these areas.
Information and communication
Key guidelines, manuals, etc. that are essential for financial reporting are kept up to date and communicated continually to the staff involved. Both formal and informal information channels to the senior management team and Board exist to ensure that important information is communicated by staff. Guidelines for external communication ensure that the company meets the strict requirements for accurate information placed by the financial markets.
Follow-up
The Board assesses the information that the senior management team and audit committee submits. The audit committee’s follow-up of the efficiency of the work of the senior management team is especially important in this area. The work includes ensuring that measures are implemented concerning errors and proposals identified in internal and external audits.
Internal audit
The Board has assessed the need for a special verification function (internal audit). Because the organisation for internal controls performed efficiently the Board has decided that the follow-up work as described above is sufficient and that a special internal verification function is not required.
The corporate governance report, including the report on internal controls, is not a formal part of the annual report and has not been checked by the company’s auditors.
Solna 15 February 2007
Ingvar Petersson, chairman
Michael M.F. Kaufmann, deputy chairman
Stewe Cato
Gunilla Jönsson
Gösta Brink
Per Lundberg
Ewald Nageler
Yngve Stade
Meg Tivéus