In its governance of the company in 2008 the Board put extra focus on issues related to cost savings activities within wood supply, energy and other costs, development of new products and customer concepts in close cooperation with end customers, working capital management and financing issues.
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 at Billerud during the spring of 2005. The report is not part of the formal annual report and has not been checked by the company’s auditors.
The Billerud Corporate Governance Policy
Organisation of Billerud Corporate Governance
A summary of implementation of the Swedish code of corporate governance as of 2008 is presented below.
1. Annual General Meeting: The code has been implemented.
2. Nominations committee: The code has been implemented with the following exceptions.
2.1.2 Chairman of the Board or other Board member shall not be chairman of the nominations committee: The reason for non-conformance is that the 2008 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.
3. The Board: The code has been implemented
4. Company management: The code has been implemented
5. Corporate governance: The code has been implemented
To read the complete table
Ownership structure and shares
At the end of 2008 the total number of shareholders was 118,222 compared with 144,447 at the end of the previous year. The portion of foreign ownership increased to 46.2% (46.1) excluding shares bought back and owned by the company (1,851,473). The other owners are private Swedish individuals, 35.4% (36.0), and Swedish legal entities 16.7% (19.6).
In early summer a programme approved by the 2008 AGM concerning commission-free trading was carried out for directly registered shareholders who held 99 shares or fewer. This offer was available from 12 May to 2 June 2008 and around 21,000 shareholders responded. A reduction in the number of directly registered shareholders benefits all owners of Billerud shares by cutting costs.
Further details about the company’s shares
Further details about the company’s shareholders
Annual General Meeting (AGM), etc.
The 2008 AGM
The 2008 Annual General Meeting was held on 29 April 2008 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 the introduction of a programme for commission-free trading.
The 2009 AGM
The 2009 AGM will take place on 6 May at 15.00 at Nalen, Regeringsgatan 7, Stockholm.
Nominations committee for 2009 AGM
The 2008 AGM decided to set up an nominations committee ahead of the 2009 AGM. The nominations committee was appointed by the Chairman contacting the larger shareholders during the autumn of 2008. 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 2010 AGM.
On 23 October 2008 an elections committee for the 2009 AGM was appointed comprising Michael M. F. Kaufmann, Frapag Beteiligungsholding AG, (chairman), Anders Oscarsson, SEB Fonder and SEB Trygg Liv, and Fredrik Nordström, AMF Fondförvaltning AB. 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 24.5% of the votes in Billerud.
Ahead of the 2009 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 Beteiligungsholding AG, 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 2008 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 11 times in 2008, including 2 times via telephone conference. One meeting coincided with a tour of the Billerud Gruvön 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. These instructions are available on the company’s website, together with instructions for the CEO.
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.
Work of the Board in 2008
In 2008, the Board, inter alia, considered the issues concerning:
• Financial statements, interim reports and audit
• Strategy and policies
• Financial plans and budgets
• Structure, acquisitions and investments
• Evaluation of the Board and the work of the CEO
The Board has in 2008 also put extra focus on issues related to cost savings activities within wood supply, energy and other costs, development of new products and customer concepts in close cooperation with end customers, working capital management and financing issues.
Rules of procedures for the Board 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 2008 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 is a Billerud employee, and thus a dependent of the company. During 2008 the secretary of the committee was Wilhelm Lüning of the Cederquist legal firm.
Work in 2008
During 2008 the audit committee held six 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 2008, risk analysis, internal controls 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 2008 the members of the committee were: Ingvar Petersson, (chairman), Per Lundberg and Yngve Stade. The head of human resources, Cecilia Lundin, was the secretary but was not a member of the committee. The committee met 4 times in 2008. Attendance of members of the committee is presented in the table below.
Rules of procedures for the Compensations committee
Work in 2008
In 2008 discussions were held concerning, a review of employment terms for senior executives, bonus outcomes for 2007, a salary review for 2009 and the bonus criteria for senior executives in 2009. 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 2008 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 are presented on page10. For details of fees, note 4 of the 2008 annual report.
During the autumn 2008 work began aimed at procuring auditor services for the period 2009-2012.
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 three business area managers.
The senior management team normally meets once a week, with face-to-face meetings and telephone conferences in alternating weeks. In 2008 the senior management team addressed issues concerning financing, emergency communication, staff surveys, cost savings, wood supplies, wood prices, production, energy, markets, pricing, the environment, environmental permits, investment and human resources.
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 2008:
Finance managers committee: Bertil Carlsén
R&D committee: Stina Blombäck
Purchasing committee: Per Lindberg
IT committee: Bertil Carlsén
Human resources committee: Cecilia Lundin
All members of the senior management team have attended the OMX Nordic Exchange Stockholm’s training course for Board members and leading executives of listed companies.
Information about the Senior Management Team members
Principles for remuneration of senior executives
The 2008 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 2008 annual report.
For the complete decision concerning the principles for remuneration see the minutes of the 2008 AGM
Report on internal controls
The responsibility of the Board and CEO for internal controls is regulated by the Swedish companies act. The responsibility of the Board is also regulated by the Swedish code of corporate governance which contains a requirement for annual publication of external information about how internal controls for financial reporting are organised.
Billerud has set the following goals for internal controls.
Internal controls
1. Compliance with regulations
Internal controls shall ensure that Billerud complies with all laws and regulations.
2. Financial reporting
Internal controls shall ensure that all of Billerud’s financial reporting is reliable and provides managers, the Board and shareholders with complete information to ensure that they can assess the company’s development.
3. Operational activities
Internal controls shall ensure that the company’s operational activities are appropriate, efficiently organised and performed in such a way that the risk of the business not achieving its financial and operational targets is assessed and dealt with continually.
To achieve this goal, work is carried out in a process based on the framework for internal controls published by the Committee of the Sponsoring Organizations of the Treadway Commission (COSO). The process includes a control environment that creates discipline and structures for the other four components in the process – Risk assessment, Control activities, Information & Communication, and Follow-up
The process is controlled at the overall level by the Board and Board committees, and at operational level by the CEO, senior management team and other staff. In the process, special attention is paid to ensure that application of internal controls achieves a balance between the control activities and the development of an effective control environment with individual responsibility taken throughout the organisation.
Priority areas in 2008
During 2008 work on internal controls focused on the following areas.
Financial reporting
- The development of joint methods throughout the Group for the application of updated accounting instructions
- The introduction of a new Group reporting system
Operational risks
- Identification of risks of disruption to wood flows and adoption of measures for securing long-term efficiency of wood supplies through establishment of Billerud Skog.
- Control of credit management process with regard to division of responsibility, working methods, credit terms and follow-up.
External financial reporting
The following report has been produced in accordance with the Swedish code of corporate governance and appropriate instructions for application of the code, and constitutes the Board’s report on internal controls concerning financial reporting.
The purpose of internal controls for financial reporting is to provide suitable safeguards concerning the reliability of external financial reporting in the form of interim reports, year-end financial statements, annual reports and to ensure that external financial reporting is produced in accordance with all laws, appropriate accounting standards and other requirements placed on listed companies. The following description of internal controls concerning financial reporting has not been verified by the company's auditors.
During the year there was a focus on integrating legal and operational reporting and the planning of system structures in a new Group reporting system. These measures will facilitate follow-up of financial reporting according to plans and targets, and increase the reliability of tracking information.
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.
During 2008 an assessment was made of the application of accounting instructions updated in 2007.
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 2008 and described on pages xx and in note x 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 11 February 2009
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