Corporate governance

A YEAR WITH THE BOARD OF DIRECTORS

The Board of Directors is accountable to the company’s shareholders for the way the company conducts its business.

The Board of Directors and Executive Management again fulfilled their main responsibilities and achieved a positive assessment in 2012.

Novozymes aims to ensure corporate openness and transparency at all times, and to provide stakeholders with relevant insight into the business and the way it is managed. To this end it has developed effective management systems over many years and regularly updates these to reflect changes in legal requirements, new business developments and stakeholder expectations.

A cornerstone of these management systems is Novozymes’ corporate governance structure.

Board of Directors: composition and responsibilities

In accordance with Danish legislation, Novozymes has a two-tier management system comprising the Board of Directors and Executive Management, with no individual being a member of both. The division of responsibility between the Board of Directors and Executive Management is clearly laid down and described in the Rules of procedure for the Board of Directors and Rules of procedure for Executive Management, available at www.novozymes.com.

Novozymes’ Articles of Association require the Board of Directors to have four to eight members elected by the annual shareholders’ meeting. Currently, the Board has six such 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 of current members. 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 of Directors 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.

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 section Board of Directors and Executive Management.

The Board’s main responsibilities are to:

  • Ensure the right management and organizational structure
  • Supervise financial, social and environmental performance, and Executive Management’s day-to-day running of the company
  • Decide the overall management and strategic development of the company

For an overview of the tasks performed to fulfill these responsibilities, see the diagram A Year with the Board of Directors.

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, Henrik Gürtler, and the Vice Chairman, Kurt Anker Nielsen – and is responsible for assisting the Board of Directors in matters concerning Executive Management compensation and nomination and in overseeing Executive Management’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 compensation for the Board of Directors.

In addition, the Board of Directors has established an Audit Committee. Further information about the committee can be found at www.novozymes.com.

A YEAR WITH THE BOARD OF DIRECTORS

The Board of Directors is accountable to the company’s shareholders for the way the company conducts its business.

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 OMX Copenhagen. These recommendations are available at www.corporategovernance.dk. A detailed review of Novozymes’ position on all of the recommendations can be found in the statutory report on corporate governance pursuant to section 107b of the Danish Financial Statements Act, under Corporate Governance at www.novozymes.com.

The recommendations require companies to explain any noncompliance. Novozymes follows 72 of 79 recommendations, the exceptions being:

  • Remuneration and nomination committees have not been set up. Instead, these responsibilities are laid down in the Charter for the Chairmanship (Recommendations 5.10.7 and 5.10.8)
  • Information on the remuneration of Executive Management is provided at an aggregate rather than an individual level. Novozymes considers this information to be private and confidential, and believes that information at an individual level is of limited value to shareholders and that the information provided is adequate to evaluate the compensation of Executive Management. Information on the maximum level of individual remuneration is nevertheless provided – see Note 4 to the consolidated financial statements (Recommendation 6.2.3)
  • The remuneration policy for Executive Management contains no specific clause on 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 6.1.8)
  • The current Executive Management has the right to termination payments amounting to a maximum of three years’ fixed base salary and pension contributions, in other words excluding variable compensation. This maximum does not currently exceed  two years' total remuneration. Novozymes has decided not to change existing contracts, but future contracts will provide for a maximum of two years’ fixed base salary (Recommendation 6.1.9)
  • 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 (Recommendations 1.4.1 and 1.4.2)

We also work within the parameters of Touch the World (www.novozymes.com)– a document outlining our values and commitments – and we have committed to principles derived from the United Nations Global Compact and United Nations Convention on Biological Diversity.

Self-assessment of the Board of Directors

The Board of Directors held eight meetings in 2012. The attendance rate was 95%.

In order to ensure that Novozymes has well-functioning management systems in place at all times, the Board of Directors and Executive Management assess annually whether their main responsibilities have been fulfilled. The performance of the Board of Directors and Executive Management and the quality of collaboration between these two bodies are also discussed and assessed.

The assessment in 2012 was facilitated by an external party and was positive, with only minor areas for improvement identified. Overall, there was broad satisfaction with the planning, content and implementation of the meetings. The general impression was that presentations and discussions at the meetings were of high quality, and that Executive Management was very responsive to input from the Board of Directors. The Board of Directors and Executive Management plan to sharpen their focus on risk analysis and mitigation plans.

The Audit Committee held four meetings in 2012, with all members present at all meetings.

The Audit Committee also performs an annual assessment of its own performance, and the external auditors are asked to evaluate whether its performance fulfilled the requirements of the Audit Committee's charter. The 2012 assessment was again positive and confirmed compliance with the charter.

Each year, the Audit Committee evaluates the need for an internal audit function at Novozymes. Based on its positive assessment of the company’s internal control system, the Board of Directors has decided, based on a recommendation from the Audit Committee, that the establishment of an internal audit function is not necessary.

Other Board-related information

Changes to the Articles of Association require that shareholders representing at least 2/3 of the total number of votes in the company are represented at the shareholders’ meeting, and that at least 2/3 of both the votes cast and 2/3 of the voting capital represented at the meeting vote 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 OMX Copenhagen on the date of acquisition. The authorization applies until March 1, 2017.

Each year, one of the responsibilities of the Board of Directors is to assess and ensure the ownership structure with A and B common stock is optimal. The Board of Directors remains of the opinion that this is the best way to safeguard Novozymes’ long-term development to the benefit of the company’s shareholders and other stakeholders.

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.

Novozymes is party to contracts where managerial staff can claim compensation in case of resignation, dismissal or where the position is made redundant due to takeover bids.

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