Corporate Governance Report for Duni AB (publ) 2010

Duni AB is a Swedish limited public company which has been listed on NASDAQ OMX in Stockholm since November 14, 2007. Governance of Duni takes place through general meetings, the Board of Directors and the CEO, as well as Duni’s group management, in accordance with, among other things, the Swedish Companies Act, the Company’s Articles of Association and rules of procedure for the Board of Directors and the CEO. Representatives from Duni's group management also serve as directors on the boards of subsidiaries.

Duni has undertaken to NASDAQ OMX Stockholm to apply the Swedish Corporate Governance Code (the "Code"), which is applied by all Swedish companies whose shares are admitted to trading on a regulated market in Sweden. Duni currently applies all sections of the Code. Pending the 2010 annual general meeting, Board Chairman Anders Bülow was also chairman of the Nomination Committee. In the current Nomination Committee pending the 2011 Annual General Meeting, Rune Andersson, who represents the largest shareholder, was elected chairman of the Nomination Committee, and Duni thus applies all sections of the Code.

Articles of association 

The current articles of association were adopted at the Annual General Meeting held on May 6, 2009. They provide, among other things, that the registered office shall be in Malmö, that members of the Board of Directors shall be elected each year for a term of office until the close of the next Annual General Meeting, and that each share shall carry one vote. The complete articles of association are available on Duni's website, www.duni.com.

General meetings 

At the General Meeting, the shareholders decide upon key issues. Among other things, the General Meeting adopts the income statements and balance sheets, resolves upon allocation of the Company’s earnings, discharge from liability for the directors and the CEO, election of the Board of Directors and auditors, as well as remuneration to the Board of Directors and auditors.

Pursuant to the Swedish Companies Act, notice to attend Duni’s Annual General Meeting must be given not earlier than six weeks and not later than four weeks prior to the meeting. Notice shall be given through an announcement in Post och Inrikes Tidningar (The Official Gazette) and on Duni's website. The fact that notice has been given shall be announced in Svenska Dagbladet. In order to participate at the Annual General Meeting, a shareholder must notify the Company thereof not later than the date stated in the notice.

2010 Annual General Meeting

Duni's 2010 Annual General Meeting was held on Wednesday, May 5, 2010 in Malmö. 130 shareholders, representing approximately 61% of the voting rights, were present at the General Meeting in person or through proxies. The Chairman of the Board, Anders Bülow, was elected to chair the meeting. All directors were present. The minutes are available on Duni's website, www.duni.com. Some of the resolutions adopted at the General Meeting were:

  • that a dividend of SEK 2.50 per share be distributed for the 2009 financial year, in accordance with the Board's proposal;
  • that the Board shall comprise five directors without alternates;
  • that all directors be re-elected in accordance with the Nomination Committee’s proposal;
  • that Anders Bülow be re-elected as Chairman of the Board;
  • that fees be paid in the amount of SEK 500,000 to the Chairman of the Board and SEK 250,000 to each of the other directors, in addition to fees for committee work. Board fees including fees for committee work are unchanged from the preceding year;
  • that the Board’s proposal for guidelines for compensation to senior executives be adopted;
  • procedures regarding the composition and work of the Nomination Committee;
  • that the Board be authorized, on one or more occasions until the next annual general meeting, to decide upon an increase in the Company's share capital not exceeding SEK 5,800,000, through the issuance of not more than 4,640,000 shares.

2011 Annual General Meeting 

The next Annual General Meeting of shareholders of Duni will be held at 3pm on Thursday, May, 5, 2011 at Sankt Gertrud Konferens, Östergatan 9 in Malmö. More information about the Annual General Meeting, notice of participation, etc. is available on Duni's website.

Nomination Committee

Board Chairman Anders Bülow convened the Nomination Committee in October 2010. The Nomination Committee shall be comprised of representatives of Duni's three largest shareholders as per September 30. The work of the Nomination Committee begins by reviewing the independent evaluation of the current Board, which is carried out each year. The Nomination Committee nominates the persons to be proposed at the Annual General Meeting for election to Duni's Board. Proposals are also produced regarding auditor fees, Board fees for the Chairman of the Board and other directors, as well as compensation for committee work. The 2011 Annual General Meeting will elect auditors and it is the Nomination Committee which proposes the election of auditors, based on an investigation and recommendation by the Audit Committee. All proposals are presented at the Annual General Meeting as well as in the notice to attend and on the website prior to the Annual General Meeting.

The Nomination Committee’s composition was presented on November 4, 2010 and comprises the following members

Name Represents Ownership share 
Dec 31, 2010 
Anders Bülow  Chairman of the Board  
Rune Andersson 
(Chairman)
Mellby Gård Investerings AB 29.99%
Bernard R. Horn Jr Polaris Capital
Management, LLC
10.73%
Björn Franzon Swedbank Robur fonder 7.08%
Total   47.80%

 

During the period, the Nomination Committee held three meetings at which minutes were taken.

The Board of Directors 

Duni’s Board decides on the Company’s business focus, strategy, business plans, resources and capital structure, organization, acquisitions, major investments, divestments, the annual report and interim reports, and other overarching issues of a strategic nature. The Board also appoints the CEO, who is responsible for the day-to-day management in accordance with the Board’s instructions. 

The directors

The directors are elected each year by the Annual General Meeting for a term of office until the close of the next annual general meeting. Pursuant to the Articles of Association, the Board shall comprise no fewer than three and no more than twelve directors, as well as employee representatives. Since the Annual General Meeting held on May 5, 2010, the Board comprises five directors and two employee representatives. Duni's CEO is not a member of the Board but usually participates at board meetings to present matters, as does the CFO.

The Board comprises the following members

The Board's work

At the first ordinary board meeting which is held after the Annual General Meeting, Duni's Board adopts written instructions which describe the Board's rules of procedure. The adopted rules of procedure state how the work is to be allocated between the Board’s members, and how often the Board shall meet. In addition, the rules of procedure regulate the Board's obligations, quorum, instructions to the CEO, the allocation of responsibility between the Board and the CEO, etc. The Board has also established two committees from among its members: the Audit Committee and the Remuneration Committee.

The Board meets in accordance with a predetermined yearly plan, even if additional meetings are arranged as needed. During 2010, the Board held eight meetings at which minutes were taken.

The following items, among others, were on the agenda in 2010:

  • Annual accounts, including report from the auditors, proposed allocation of earnings, and results for the year;
  • Annual report and preparations pending the Annual General Meeting;
  • Interim reports;
  • Rules of procedure for the Board and the CEO;
  • Annual review of the policy manual;
  • Review of business plans, strategies and growth issues;
  • Visit to the subsidiary Duni Benelux NV in Breda, Holland, where a market analysis was also on the agenda and, in connection therewith, a study visit took place to a wholesaler;
  • Investments in the subsidiary Rexcell Tissue & Airlaid AB in Skåpafors, Sweden;
  • The Group’s logistics and distribution structure;
  • The fire in June at a production facility in Skåpafors, Sweden, at the subsidiary Rexcell Tissue & Airlaid AB;
  • Budget for 2011.

In addition to the board meetings, the Chairman of the Board and the CEO hold regular discussions concerning the management of the Company.

The CEO, Fredrik von Oelreich, is responsible for implementation of the business plan as well as the regular management of the Company's affairs, and also the day-to-day operations in the Company. Where so required, he is also entitled to take decisions and implement measures of major significance for the Company without having to await a decision by the Board. When this occurs, the Board must be informed as soon as possible.

The Board receives monthly written information in the form of a monthly report containing monitoring of the Company's sales, operating income and working capital trend, as well as comments on how the various markets are developing. Prior to board meetings, the Board also reviews the balance sheet and cash flow.

The main owners, the directors and the CEO also conduct each year a detailed evaluation of the Board of Directors based on the adopted rules of procedure. The evaluation covers, among other things, the composition of the Board, individual directors, as well as the Board’s work and routines.

The Code also contains rules regarding the independence of the directors and imposes the requirement that a majority of the directors must be independent of the Company and company management. A director is not considered to be independent in a number of situations, among others if the director:

i) is the CEO of the Company or was the CEO during the past five years;
ii) receives from the Company or an affiliated company or from any member of company management, not insignificant compensation for advice or services over and above the Board appointment;
iii) has, or has had during the past year, extensive commercial relations or other extensive business dealings with the Company or an affiliated company; or
iv) has been a director of the Company for more than twelve years.

At least two of the directors who are independent of the Company and company management must also be independent in relation to all shareholders who control ten percent or more of the share capital or voting capital of Duni AB. Not more than one member of company management may be a member of the Board.

Board attendance:

  Function Independent 1) Board
meetings
Audit
Committee
Remuneration
Committee
Anders Bülow Chairman 2) 8 of 8 5 of 5 3 of 3
Pia Rudengren Director Yes 8 of 8 5 of 5 -
Sanna Suvanto-Harsaae Director Yes 7 of 8 4 of 5
Magnus Yngen Director Yes 8 of 8 - 3 of 3
Tomas Gustafsson Director Yes  8 of 8 - 3 of 3
Per-Åke Halvordsson Employee
representative 
3) 8 of 8 - -
Göran Andreasson Employee
representative 
3) 8 of 8 - -
Inge Larsson Employee
representative 
3) 7 of 8 - -
1) As defined in the Swedish Corporate Governance Code.
2) Not independent (in relation to Duni's major shareholders).
3) Not independent (in relation to Duni). 

 

Remuneration Committee 

The Remuneration Committee prepares issues concerning remuneration and other benefits for corporate management, while decisions thereon are taken by Duni's Board of Directors. Once a year, the Remuneration Committee evaluates the performance of senior executives and also certain second-tier managers in accordance with a systematic procedure.

The Remuneration Committee held three meetings in 2010 and comprises three members: Magnus Yngen (Chairman), Anders Bülow and Tomas Gustafsson. Fredrik von Oelreich participates at meetings of the Remuneration Committee, except when questions concerning remuneration to the CEO are addressed. Moreover, the HR Director participate as appointed secretary at the meetings.

Audit Committee

The Audit Committee is responsible for ensuring the quality of the Company’s financial and business reporting. The Committee also evaluates Duni’s internal control processes and management of financial and operating risks. The Committee meets regularly with the Company’s auditors in order to obtain information regarding the focus and scope of the external audit and to evaluate the work of the external auditors. The evaluation also covers the scope of any non-audit-related work performed by the auditors on behalf of Duni. When preparing a proposal regarding the election of auditors and compensation for audit work, the Nomination Committee is assisted by the Audit Committee.

The Audit Committee held five meetings in 2010 and comprises three members: Pia Rudengren (Chairman), Anders Bülow and Sanna Suvanto-Harsaae. The CFO and the Group Accounting Manager, as well as the auditors, participate at all meetings. However, the auditors did not participate at the meeting which addressed the election of auditors.

Remuneration to Board of Directors

Fees and other remuneration to the Board, including the Chairman of the Board, are decided upon by the Annual General Meeting. In accordance with a resolution adopted by the Annual General Meeting on May 5, 2010, the annual fee was set at a total of SEK 1.5 m, of which SEK 0.5 m is payable to the Chairman of the Board. In addition, a resolution was adopted regarding fees for committee work totaling SEK 0.3 m.

The allocation of the remuneration among the members of the Board is shown in the table below.

Board remuneration for the period May 2010 – April 2011

SEK Board
meetings 
Audit
Committee
Remuneration
Committee
Total
Anders Bülow 500 000 50 000 25 000 575 000
Pia Rudengren 250 000 100 000 - 350 000
Sanna Suvanto-Harsaae 250 000 50 000 - 300 000
Magnus Yngen 250 000 - 50 000 300 000
Tomas Gustafsson 250 000 - 25 000 275 000
  1 500 000 200 000 100 000 1 800 000

 

CEO

Duni’s CEO is Fredrik von Oelreich (1961), MBA. The Board has adopted instructions regarding the work and role of the CEO. The CEO is responsible for the day-to-day management of the Company’s operations in accordance with guidelines issued by the Board of Directors.

On December 31, 2010, Fredrik von Oelreich held 210,000 shares in Duni AB. No party closely related to the CEO has any significant shareholding in Duni AB. Fredrik von Oelreich has no ownership interests in companies with which Duni has significant commercial relations. Further information regarding the CEO is provided in Note 13 in the Annual Report.

Group management 

Fredrik von Oelreich presides over the work of group management and adopts decisions in consultation with other members of group management, consisting of the heads of business areas and heads of staff functions. Group management comprises eight persons. Group management held seven meetings in 2010. At each meeting, the following items, among others, are on the agenda: 

  • Financial review.
  • Update from each area.
  • Issues of an operational, strategic or market nature of importance for Duni. 

Other matters addressed include the strategic plan, as well as budget for the coming year. Members of group management conduct regular visits to subsidiaries, and at least one such visit is carried out jointly. In 2010, group management held a meeting at the subsidiary in Spain. A meeting was also held in Germany in connection with a study visit to a trade fair for the HoReCa industry.

Group management comprises the following members

Remuneration to senior executives

According to guidelines regarding remuneration to senior executives adopted by the Annual General Meeting on May 5, 2010, remuneration to the CEO and other members of group management shall be on market terms and comprise fixed and variable salary, other benefits as well as pension. The variable salary shall never exceed the fixed salary. 

2010, SEK m Basic
salary 
Variable
remuneration
Other
benefits 
Pension
cost
Total
CEO - Fredrik von Oelreich 4.2 1.2 0.1 2.0 7.5
Other senior executives 9.8 2.2 0.4 2.5 14.9
  14.0 3.4 0.5 4.5 22.4

The table above shows the total gross remuneration paid to group management, including basic salaries, variable remuneration, pension payments and other benefits. Fredrik von Oelreich receives an annual gross salary of CHF 610,715 and has a possibility to achieve a bonus equivalent to not more than 55% of his annual basic salary, based on predetermined targets for the Group. In addition, he is entitled to certain other employment benefits such as a company car. Both Duni and von Oelreich may terminate the agreement upon six months’ written notice. In addition, except in the event of termination by the Company due to negligence, von Oelreich is entitled to an amount equal to twelve times his monthly salary. Von Oelreich participates in a contribution-based pension plan to which Duni makes an annual contribution equal to 35% of his annual gross salary and a three-year average of bonus payments, until termination of the agreement. Von Oelreich’s retirement age is 62.

Duni has not granted any loans, extended or issued any guarantees or provided any security to the benefit of Duni’s directors, senior executives or auditors. None of the directors, senior executives or auditors has entered into transactions with Duni, whether directly or indirectly through any affiliated company. 

Audit

At an extraordinary general meeting held on August 28, 2007, PricewaterhouseCoopers AB was elected auditor, with Bo Hjalmarsson as auditor-in-charge, for the next four years. The auditors review the annual accounts and the Annual Report as well as the Company’s ongoing operations and routines in order to express an opinion regarding the accounts and management by the Board of Directors and the CEO. The audit of the annual accounts and Annual Report is conducted in January-February. Thereafter, compliance with the Annual General Meeting’s guidelines regarding remuneration for senior executives is audited. There is also a review of Duni's interim report for the third quarter. Other than Duni, Bo Hjalmarsson has no engagements in companies over which Duni’s major owners, directors or the CEO have a significant influence. Bo Hjalmarsson is an authorized public accountant and member of FAR SRS. Apart from the audit engagement, fees to PwC for other engagements during 2010 totaled SEK 5.2 (2009: 6.7) m.

Compensation to accounting firm

SEK m Group Parent Company
  2010 2009 2010 2009
Compensation for audit engagement 4.1 4.0 1.7  1.7 
Compensation for auditing work other than the audit 0.6 0.6 0.4 0.4
Compensation for tax consultation 3.0 2.9 0.8 0.9
Compensation for other consultations  1.6  3.2 0.4 1.0
Total compensation, accounting firm 9.3 10.7 3.3 4.0
Duni AB, P.O Box 237, SE 201 22 MALMÖ, Sweden. Tel: + 46 40 10 62 00