Corporate governance

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Novozymes aims to ensure that the Board of Directors always has the best possible mix of competencies, and therefore three new members with new areas of expertise and experience were elected in 2011. The relationship between the Board of Directors and Executive Management was once again considered very satisfactory.

Novozymes’ management systems have been developed over several years and are constantly adjusted to reflect changes in legal requirements, new business developments, and stakeholder expectations. A cornerstone of these management systems is Novozymes’ corporate governance setup.

Corporate governance is the name commonly given to the frameworks and guidelines for business management, including the overall structures and principles that regulate the interaction between a company’s management bodies, shareholders, and other stakeholders. As every company is unique, there is no exact standard for “good corporate governance.” However, a number of valid principles have been developed and stated in recommendations, guidelines, or law. Novozymes’ goal is to have management systems in place that ensure openness and transparency at all times, providing stakeholders with relevant insight into the business – and, of course, effective management.

In accordance with Danish legislation, Novozymes has a two-tier management system comprising the Board of Directors and Executive Management, with no individual 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.

Graphics
Novozymes powered by electricity from wind turbines
Novozymes in Denmark is now running on environmentally friendly electricity from wind turbines. Novozymes now has lower CO2 emissions than in 2005.
Highlights of 2011
The integration of EMD Crop BioScience is one of the big achievements of 2011.
Perspectives from Executive Management
Novozymes' Executive Management reflect on the past year and what lies ahead.

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.

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. The Chairmanship comprises the Chairman and Vice-Chairman of the Board (Recommendations 5.10.7 & 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. We believe 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 (rec. 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 (rec. 6.1.8)
  • The current Executive Management has the right to termination payments amounting to a maximum of 3 years’ fixed base salary and pension contributions. This maximum does not currently exceed the recommended maximum of 2 years' total remuneration. Novozymes has decided not to change existing contracts, but future contracts will provide for a maximum of 2 years’ fixed base salary (rec. 6.1.9)
  • Due to the limitations imposed by the articles of association of the Novo Nordisk Foundation and Novozymes’ ownership structure, the Board of Directors reserves the right in certain circumstances to reject takeover bids without consulting shareholders (rec. 1.4.1 & 1.4.2)

A detailed review of Novozymes’ position on all of the recommendations can be found under Corporate governance at www.novozymes.com.

Novozymes also acts within the parameters of Touch the World – a document setting out our values and commitments – and we have committed to principles derived from the UN Global Compact and UN Convention on Biological Diversity.

Changes since last year

Lena Olving, Agnete Raaschou-Nielsen, and Jørgen Buhl Rasmussen joined the Board of Directors in 2011, while Walther Thygesen and Jerker Hartwall did not seek re-election.

The composition of the Board of Directors must be such that the combined competencies of its members enable it always to inspire, guide, and oversee the company’s development, and diligently address and resolve the issues and problems faced by the company at any time. The Board should also represent a diversity of experience, background, gender, and origin. When selecting the new members, priority was therefore given to finding individuals whose particular skills provide a strong bridge between innovation and the marketplace, as this is essential for Novozymes.

Lena Olving and Agnete Raaschou-Nielsen have been appointed members of the Audit Committee. The Board of Directors considers that these two new members of the Audit Committee fulfill the statutory requirements for accounting expertise and independence. The Audit Committee is chaired by Kurt Anker Nielsen.

Self-assessment of the Board of Directors

The Board’s main responsibilities are to:

  • Ensure the best possible day-to-day management of the company and the right organizational structure
  • Supervise financial and sustainability performance, and Executive Management’s day-to-day running of the company
  • Participate in 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.

The Board of Directors held seven meetings in 2011. Four were attended by all board members, and the remaining three by all but one member.

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 2011 was once again 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. There was agreement that the succession process for the new board members had been well prepared and executed, and there was great satisfaction with the increased diversity in the Board. The Board and Executive Management contemplated an increase in one-on-one meetings between individual members of Executive Management and the Board of Directors when projects or other circumstances so require.

One of the responsibilities of the Board of Directors is to assess each year whether the ownership structure with A and B common stock is optimal. The Board of Directors maintains that this is the best way to safeguard Novozymes’ long-term development and thus to benefit the company’s shareholders and other stakeholders.

In addition, the Audit Committee 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 2011 assessment was very positive and resulted in only minor suggestions for improvement.

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 environment, the Audit Committee has advised the Board of Directors that the establishment of an internal audit function is not necessary.

"Overall, there was broad satisfaction with the planning, content, and implementation of the board meetings."