In its governance of the company in 2007 the Board focused on the issues of energy and wood supplies. A new subsidiary, Billerud Skog AB, was formed with the purpose of improving the effectiveness of wood supplies. A number of projects have begun with the aim of developing and securing value creation for end-customers when using Billerud's products. In addition to this the Board continually monitored the company’s strategies and its long-term investment requirements. A new rewards scheme, the Long Term Incentive Programme, was introduced.
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, which is in force since 1 July 2005. This code was introduced at Billerud during the spring of 2005.
The Billerud Corporate Government Policy
Organisation of Billerud Corporate Government
Summary of implementation of the Swedish code of corporate governance as of 2007
- 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 reason for non-conformance is that the 2007 AGM decided that the chairman of the nominations committee shall be the Board member representing the largest owner in terms of numbers of shares. Michael M.F. Kaufmann represents the largest shareholder and is therefore chairman of the nominations committee. He is also a Board member and vice chairman of the Board.
- The Board: The code has been implemented
- Company management: The code has been implemented
- Corporate governance: The code has been implemented
To read the complete table
Ownership structure and shares
At the end of 2007 the total number of shareholders was 144,447, compared with 151,762 at the end of the previous year. The portion of foreign ownership increased to 46.1% (42.7) excluding shares bought back and owned by the company (1,851,473). The other owners are private Swedish individuals, 36.0% (41.0), and Swedish legal entities, 19.6% (16.3).
Further details about the company’s shares
Further details about the company’s shareholders
Annual General Meeting (AGM), etc.
The 2007 AGM
The 2007 Annual General Meeting was held on 3 May 2007 at Aula Magna, Stockholm University. Among other matters, the meeting agreed to re-elect the existing Board: Ingvar Petersson, Gunilla Jönson, Michael M.F. Kaufmann, Per Lundberg, Ewald Nageler, Yngve Stade and Meg Tivéus. The meeting also agreed to adopt a long term incentive programme.
The 2008 AGM
The 2008 AGM will take place on 29 April 2008 at Aula Magna, Stockholm University.
Nominations committee for 2008 AGM
The 2007 AGM decided to set up an nominations committee ahead of the 2008 AGM. The nominations committee was appointed by the Chairman contacting the larger shareholders during the autumn of 2007. The nominations committee will make proposals regarding a chairman for the AGM, Board members, Board Chairman and Vice Chairman and the remuneration to Board members and auditors. The committee will also make proposals for appointing the elections committee ahead of the 2009 AGM.
On 19 October 2007 an elections committee for the 2008 AGM was appointed comprising Michael M. F. Kaufmann, Frapag Vermögensverwaltung AG, changing name to Frapag Industrieholding AG, (chairman), Anders Oscarsson, SEB Fonder and SEB Trygg Liv, and PO Nilsson, Prior & Nilsson Fond och Kapitalförvaltning. On 23 November 2007 it was announced that Fredrik Nordström, AMF Fondförvaltning AB, would replace PO Nilsson, due to changes in the size of the shareholding. Ingvar Petersson, Chairman of Billerud AB, is secretary and convenor, but not a member of the nominations committee. No special remuneration was paid to the chairman or any other members of the nominations committee for their work.
The three owner representatives represent around 22% of the votes in Billerud.
Ahead of the 2008 AGM the nominations committee held minuted meetings and kept in contact via telephone and e-mail. Billerud’s website contains a page entitled “Nominations committee” within the section on “Corporate governance”, where shareholders are able to communicate with the committee.
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. 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 OMX Nordic Exchange Stockholm.
The Board also includes two members and two 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 2007 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 OMX Nordic Exchange Stockholm.
The Board met 18 times in 2007, including seven times via telephone conference. One meeting coincided with a tour of a mill.
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.
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.
Rules of procedures for the Boad of Directors
Information about the Board of Directors
Information about presence etc of Board of Directors
Information about fees paid to Board members
Assessment
At a meeting in December the Board makes its own assessment of its work during the year, including an assessment of the work of the chairman. The chairman has reported the results of this assessment to the nominations committee.
The Board continually assesses the work of the CEO. Once a year an assessment is made of the CEO without the CEO being present.
Board committees
The Board currently has two committees, the audit committee established in 2004 and the compensation committee established in 2001. The roles, composition and activities of these committees in 2007 are presented below. The Board appoints the members of these committees.
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 its supervising role, an audit committee was established in 2004. 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), Per Nilsson, Ingvar Petersson and Meg Tivéus. All members are independent of the company except for Per Nilsson, who replaced Gösta Brink on 3 May 2007. Per Nilsson, like Gösta Brink before him, is a Billerud employee, and thus a dependent of the company. During 2007 the secretary of the committee was Wilhelm Lüning of the Cederquist legal firm.
Rules of procedures for the Audit Committee
Work in 2007
During 2007 the audit committee held five meetings, of which one was a telephone conference. Attendance of members of the committee is presented on this page. During the year the committee addressed various auditing issues, the audit plans for 2007, risk analysis, internal controls, 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.
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.
In 2007 the members of the committee were: Ingvar Petersson, (chairman), Michael M.F. Kaufmann (up to 3 May 2007), Per Lundberg and Yngve Stade (from 3 May 2007). The head of human resources, Cecilia Lundin, was the secretary but was not a member of the committee. The committee met five times in 2007, of which three times via telephone conference. Attendance of members of the committee is presented in the table below.
Rules of procedures for the Compensations committee
Work in 2007
In 2007 discussions were held concerning the Long Term Incentive Programme, a review of employment terms for senior executives, employment terms for the mill manager at Gruvön, bonus outcomes for 2006, a salary review for 2008 and the bonus criteria for senior executives in 2008. The principles for remuneration to the CEO and other senior executives, and the actual figures are contained in note 24 of the 2007 annual report.
Auditors
At the 2007 AGM the accountancy firm, KPMG Bohlins AB, headed by lead auditor Caj Nackstad, was elected as auditors of the company up to the end of the 2009 AGM.
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 2007 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.
The auditors’ assignments in other companies
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. The CEO also acts as the chairman of the senior management team.
Further details about the CEO
Instructions for the CEO
The senior management team comprised the managers of the three Swedish mills, the CFO, the director for human resources and information, and the three business area managers.
The senior management team normally meets once a week, with face-to-face meetings and telephone conferences in alternating weeks. During 2007 the senior management team discussed wood supplies, production issues, energy issues, 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 presented at each meeting for each unit within the Group, along with current financial reports.
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, 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 2007:
Finance managers committee: Bertil Carlsén
R&D committee: Stina Blombäck
Purchasing committee: Per Lindberg
IT committee: Bertil Carlsén
Human resources committee: Cecilia Lundin
Information about the Senior Management Team members
Principles for remuneration of senior executives
The 2007 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 of the 2007 annual report.
For the complete decision concerning the principles for remuneration see the minutes of the 2007 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 rules announced by the Swedish Corporate Governance Board. 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.
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 2007 and described in notes 23 and 31 of this annual report. 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 7 February 2008
Ingvar Petersson, Chairman
Michael M.F. Kaufmann, Deputy chairman
Stewe Cato, Member
Gunilla Jönson Member
Per Lundberg, Member
Ewald Nageler, Member
Per Nilsson, Member
Yngve Stade, Member
Meg Tivéus, Member