4/22/2015 3:12 PM

Corporate governance report 2014

Corporate governance in NIBE Industrier AB (NIBE) is performed by the Annual General Meeting, the Board of Directors and the Managing Director/CEO in accordance with the Swedish Companies Act (Swedish Code of Statutes 2005:551), the company’s Articles of Association, the Swedish Annual Accounts Act (1995:1554), the listing agreement with the NASDAQ OMX Stock Exchange in Stockholm, and the Swedish Code of Corporate Governance (the Code).

It is good practice for Swedish companies whose shares are traded on regulated markets to comply with the Code. NIBE complies with the Code, and this Corporate Governance Report has been drawn up in accordance with the Code. The current Code may be accessed on The Swedish Corporate Governance Board’s website, www.bolagsstyrning.se. In addition, and likewise in accordance with the Code, NIBE also provides information via the company’s website.
The Corporate Governance Report is not part of the Adminisration Report. The company’s auditors have examined the Corporate Governance Board, and it is their opinion that the Corporate Governance Report has been properly drawn up and that the statutory information in the Report is consistent with other parts of the Annual Report and consolidated financial statements.


Ownership

NIBE has its registered offices in Markaryd, Sweden, and the company’s shares have been listed on the NASDAQ OMX Stockholm Exchange since 1997.

NIBE shares have also had a secondary listing on the SIX Swiss Exchange since August 2011. 21.116On 31 December 2014 NIBE had 21,116 registered shareholders, excluding previous owners of the Schulthess Group AG who have become shareholders in NIBE. As the Swiss authorities do not report any details relating to individual shareholders in Switzerland to NIBE, it is not possible to determine the total number of shareholders.

The ten largest shareholders comprise the constellation of ‘current and former board members and senior executives’ with a total of 24% of the capital and 48% of voting rights, followed by Melker Schörling who holds 11% of the capital and 20% of the voting rights, and eight institutional investors with a total of 20% of capital and 10% of voting rights, one of whom represents the previous shareholders of the Schulthess Group AG. Together these ten constellations of investors hold a total of 55% of the capital in the company and 78% of the votes.
Annual General Meeting

The Annual General Meeting (AGM) is NIBE’s highest decision-making body. The AGM elects the company’s Board of Directors and auditors, adopts the accounts, makes decisions on dividends and other appropriations of profits/losses, and discharges the Board of Directors and the MD/CEO from liability.

The most recent AGM, held on 15 May 2014 in Markaryd, was attended by 451 shareholders. Those present represented 52% of the shares and 74% of the total number of votes in the company. The AGM was attended by the Board of Directors, the MD/CEO and the company’s auditors. The minutes of the AGM and the company’s articles of association are available on the company’s homepage.

There are no limitations in the articles of association as to the number of votes a shareholder may hold at a general meeting of the company, the appointment or dismissal of directors of the company, or changes to the company’s articles of association.

The 2014 AGM gave the Board of Directors a mandate to issue new class B shares, on one or more occasions and without regard to the shareholders’ preferential rights, to be used to finance the company’s acquisition of other companies or businesses. This mandate is valid until the 2015 AGM and is restricted to a maximum of 10% of the number of class B shares issued at the time of the AGM.
Communication with the stock market

The ambition is to maintain a high standard of financial information issued by the Group. Such information must be accurate and transparent in order to create long-term confidence in the company.

Earnings and a summary of the Group’s financial position are presented quarterly and, like the Annual Report, are issued in printed form to all shareholders who so wish. All takeovers and other information that may have an effect on the company’s share price are announced via press releases. All financial information is also available on the web site, www.nibe.com. Press releases and reports are posted there at the same time as they are made public.

During the course of the year there have been a number of meetings with Swedish and foreign financial analysts, the media and Aktiespararna, the Swedish Shareholders’ Association.


Board procedures
The NIBE Board of Directors consists of six members, elected by the AGM. Directors of the company and the Chairman of the Board are elected annually by the AGM to serve for the period until the next AGM. Company employees participate in board meetings as required to submit reports or to contribute expert knowledge in individual matters.

The 2014 Board of Directors comprised Arvid Gierow (Chair), Georg Brunstam, Eva-Lotta Kraft, Hans Linnarson, Anders Pålsson and Gerteric Lindquist (CEO of the NIBE Group). With the exception of the CEO, none of the directors of the company is employed by the company or has any operational responsibilities in the company.

It is the opinion of the Board of Directors that all directors with the exception of the CEO are independent in relation to the company. Please see page 93 for a brief presentation of the directors of the company.

The work of the Board is governed by formal rules of procedure adopted annually to regulate the allocation of work, the decision-making processes within the company, authority to sign for the company, meetings of the Board and the duties of the Chairman of the Board. The Board has also adopted instructions concerning the division of work between the Board and the MD/CEO.

The Board of Directors oversees the work of the MD/CEO and is responsible for ensuring that the organisation, management and administrative guidelines for the company’s funds are suitable for the purpose. The Board is also responsible for developing and following up the company’s strategies through plans and objectives, decisions on acquisitions, major investments, appointments to managerial positions and the continual supervision of operations during the year. In addition, the Board sets the budget and is responsible for the Annual Report.

The Chairman leads the work of the Board and ensures that it is carried out in accordance with the Swedish Companies Act and other relevant legislation. The Chairman follows the progress of operations through consultations with the MD/CEO, and is responsible for ensuring that other members of the Board receive the necessary information to enable them to hold discussions of a high quality and make the best possible decisions. The Chairman is also responsible for evaluating the work of the Board.


Decision-making process

The NIBE Board deals with all matters of significance.

Issues such as the composition of the Board and directors’ fees are dealt with once a year prior to the AGM, when the Chairman of the Board contacts major shareholders personally.

The company’s auditor makes his report to the Board as a whole.

The company does not have a Nomination Committee (item 2.1 in the Code), a Remuneration Committee (item 9.1 in the Code) or an Audit Committee (item 7.3 in the Code). NIBE does not comply with the Code in respect of nominations because of the clear ownership structure with two principal shareholder constellations, which together control 70% of the company’s votes, and which also enjoy mutually cordial relations. The Board of Directors is not too large to carry out the audit and remuneration tasks in a manner consistent with the Swedish Companies Act and the Code.


The work of the Board during 2014




Group management

The CEO, who is also appointed by the Board of Directors as Managing Director of the parent, exercises day-to-day control of the Group, and the three directors of the Group’s business areas report to him.

The CEO leads operations in accordance with the instructions adopted by the Board in respect of the division of work between the Board and the MD/CEO. The work of the MD/CEO and of senior management is evaluated annually.

Financing, currency management, corporate acquisitions, new establishments, financial control, financial information, human resources policy, sustainability and other overall policy matters are coordinated at Group level.


Governance of business areas

NIBE consists of three business areas.

Each business area has its own operational management with profit responsibility. Each business area has a Business Area Board chaired by the Group’s CEO. These Business Area Boards also include external members with expertise within the respective areas.

Each Business Area Board, in addition to responsibility for day-to-day operations, is also responsible to the NIBE Board of Directors for the strategic development of its respective business area. Each Business Area Board meets once a quarter.


Remuneration 2014

The 2014 AGM resolved that the fees to the Board of Directors and the fees to the auditors should be paid in accordance with approved accounts. At the same time, policies for the remuneration of the MD/CEO and other key management personnel were detailed and approved. Further information about the principles that apply can be found in Note 6 to the Annual Report and on NIBE’s website www.nibe.com.

Remuneration to the Managing Director/CEO is a matter decided by the Board, but the preparatory work for this decision is undertaken by the Chairman of the Board after discussions with the Managing Director/CEO. The remuneration of other senior personnel is determined by the Managing Director in consultation with the Chairman of the Board. Decisions in this regard are reported to the Board of Directors.

Information on the fees paid to directors, as well as the salary and other remuneration paid to the MD/CEO and other senior executives can be found in Note 6 to the Annual Report.


Incentive programme
An incentive programme applies to certain key members of staff/senior executives, under which they are paid a variable bonus if set targets are met. The variable bonus is limited to a maximum of three months' salary. It is also possible for an additional month’s salary to be paid on condition that this additional payment plus another monthly salary paid as a variable bonus or part of a variable bonus is used to purchase NIBE shares on the stock market. A further condition for entitlement to receive this additional month’s remuneration is that the NIBE shares purchased are retained for at least three years. Under normal circumstances shares acquired in this way by members of staff shall be purchased on one occasion each year in February/March and the purchase shall be subject to the relevant insider trading regulations. No incentive programme is offered to the MD/CEO. Further information about the principles that apply for senior executives can be found in Note 6 to the Annual Report.


Severance pay
No severance pay or other benefits apply to the Chairman of the Board or to the directors, apart from the MD/CEO. The period of notice for the MD/CEO is six months in the event that the company gives notice. In addition to salary during the period of notice, the MD/CEO is entitled to severance pay equal to 12 months’ salary. Other senior executives are entitled to receive their salaries during a period of notice which varies between 6 and 12 months.


Pensions
The Chairman of the Board and the directors of the company receive no retirement benefits in respect of their work on the Board. Retirement age for the MD/CEO and other senior executives is 65. No special agreements have been reached that entitle senior executives to retire before the official retirement age while still retaining part of their salary in the interim.

Information on the retirement benefits of the Managing Director/CEO can be found in Note 6 to the Annual Report.

Internal controls of financial reporting in 2014

Under the Swedish Companies Act and the Code, the Board of Directors is responsible for internal controls.

This report on internal controls and risk management with regard to financial reporting complies with the requirements in Chapter 6, section 6 of the Annual Accounts Act.

Internal controls were an important component of corporate governance even before the new code was introduced.

NIBE is characterised by simplicity in its legal and operational structure, transparency in its organisation, clear divisions of responsibility, and an efficient management and control system.

NIBE complies not only with external laws and regulations in respect of financial reporting, but also with internal instructions and policies set out in the Group’s Finance Handbook. These are applied by all companies in the Group, along with systems aimed at ensuring effective internal controls in financial reporting.

Consolidated financial reports containing comprehensive analyses and comments are drawn up each quarter for the Group and its business areas. Results are also monitored every month.

There are finance functions and controllers with responsibility for accounting, reporting and the analysis of financial trends at Group level, business area level and major unit level.

In addition to the statutory audits of the annual report and statutory audits of the parent and all subsidiaries, the auditors carry out an annual review of how the companies are organised, of existing routines and of compliance with the instructions issued, based on guidelines drawn up by corporate management and approved by the Board of Directors. A summary of internal control procedures is presented each year as part of the board meeting that deals with the year-end financial statements. The Board also has the option of requesting a special audit of a selected business or operations during the year if this is deemed necessary.

During 2014 a project aimed at reviewing and further reinforcing internal controls was implemented. It is our opinion that this review increases insight and awareness, provides explicit instructions and proposes a clear organisation in respect of internal controls. It is therefore the opinion of the Board that, because of the implementation of this review, there is no need for any separate internal control (item 7.4 in the Code).


External auditors
NIBE’s auditors have been elected at the AGM to serve for a period of one year.

The registered public accounting firm, KPMG AB, with Alf Svensson as senior auditor, have held the position of the company's auditors since the AGM in 2013.

The senior auditor has continual access to the approved minutes of company board meetings and the monthly reports that the Board receives.

The company’s senior auditor reports his observations from the audit and his assessment of the company’s internal controls to the Board as a whole.

Over and above normal auditing duties, KPMG AB assists in particular with due diligence reviews in conjunction with corporate acquisitions and with accounting consultations. Information on the remuneration of auditors is given in Note 5 to the Annual Report.


The auditor's statement on the Corporate Governance Report
To the annual meeting of the shareholders of NIBE Industrier AB (publ)

Corporate ID number 556374-8309



The Board of Directors and the Managing Director are responsible for the Corporate Governance Report for 2014 on pages 89-92, and that it has been prepared in accordance with the Annual Accounts Act.

We have read the Corporate Governance Report, and on the basis of her reading and knowledge of the company and the Group, we consider that we have sufficient grounds for our statement. Our statutory review of the Corporate Governance Report has a different focus and is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices in Sweden

We consider that the Corporate Governance Report has been properly drawn up and that the statutory information in the Report is consistent with other parts of the Annual Report and consolidated financial statements.



Markaryd, Sweden – 26 March 2015

KPMG AB

Alf Svensson

Authorised Public Accountant

NIBE – a Global Group with sales
and operations on five continents.

NIBE Industrier AB (publ) Box 14, 285 21 Markaryd · VISITING ADDRESS Hannabadsvägen 5, Markaryd · [email protected] · +46 (0)433 27 30 00