Proactive and transparent corporate governance is key to aligning the interests of shareholders, management, employees and other stakeholders. Yara believes good corporate governance drives sustainable business conduct and long-term value creation.
Yara aims to exercise corporate governance in a manner representative of an ambitious and responsible multinational company, and has established practices adapted to the specific challenges it faces as the world’s largest global fertilizer company. With overall responsibility, Yara’s Board of Directors has decided to comply with the Norwegian Code of Practice for corporate governance. This Code has stricter requirements than those mandated by law. Yara’s compliance with the main articles of the Code is detailed below (Code’s article 1).
Yara’s Code of Conduct, which has been approved by the Board of Directors, aims to ensure that all Yara employees act in a consistent manner in line with quality standards and business needs.
The scope of Yara’s business (Code’s article 2) is defined in its Articles of Association, published in full at the company’s website, and presented in the Report of the Board of Directors. Yara is listed on the Oslo Stock Exchange and is subject to Norwegian securities legislation. Financial reporting is done in accordance with International Financial Reporting Standards (IFRS).
Annual General Meeting
In accordance with Norwegian corporate law, shareholders registered in the Norwegian Central Securities Depository (Verdipapirsentralen) can vote at the Annual General Meeting in person or by proxy on each single agenda item and candidate (Code’s article 6). Notice of the meeting and relevant documents are made available on Yara’s website a minimum of three weeks in advance of the meeting, and are sent to all shareholders individually, or to their depository banks, a minimum of three weeks in advance of the meeting.
The Annual General Meeting of shareholders
- Elects the Nomination Committee and shareholders’ representatives to the Board of Directors;
- Elects the external auditor based on the Board of Directors’ proposal, and approves the remuneration to be paid to the external auditor of the parent company;
- Approves the remuneration to the Board of Directors, the financial statements and any proposed dividend payment
The chairperson of the Board and the CEO are present at the Annual General Meeting, normally along with the Board of Directors, the Nomination Committee and the Company Auditor. An independent, qualified person chairs the meeting. The protocol of the Annual General Meeting is published at Yara’s website.
According to an agreement between Yara and the employees, Yara does not have a Corporate Assembly (Code’s article 8). Yara believes this supports more direct communication between shareholders and management, increases accountability and improves the speed and quality of decision-making in the company.
Yara’s Articles of Association state that the company shall have a Nomination Committee (Code’s article 7) consisting of four members, elected at the Annual General Meeting. The Nomination Committee nominates shareholder’s candidates to the Board of Directors, presenting relevant information about the candidates and an evaluation of independence, and proposes the remuneration of the Directors to the Annual General Meeting. Members of the committee are elected for two years at a time. All four members are independent of the Board and the Management. In 2009, the Nomination Committee had six meetings.
Board of Directors
According to Norwegian corporate law, the (non-executive) Board of Directors assumes overall responsibility for the company, ensures that appropriate steering and control systems are in place and supervises day-to-day management as carried out by the President and CEO. The Board’s work follows an annual plan, and it conducts a self-evaluation every year of its work and procedures, which is presented to the Nomination Committee.
In 2009, the Board held ten meetings. Lone Fønns Schrøder was absent from three meetings and Frank Bakke was absent from one meeting. The other Board members attended all board meetings during their board membership period in 2009.
Yara’s Board of Directors (Code’s article 8, 9 and 11) consists of eight members. The Board members are elected for a period of two years. Two of five shareholder-elected Directors are women. The Chairperson of the Board is elected by the general meeting.
In the event of the Chairperson’s absence, the Board elects a board member to chair the meeting. If the Chairman of the Board is, or has been, personally involved, in matters of a material character to the Company, the Board’s consideration of such matters will be chaired by some other member of the Board. All shareholder-elected members are independent of the Management and the main shareholders. Neither the President and CEO nor any other member of the Executive Management is a Director of the Board.
For more details on the Board members’ competence and independence, please see the presentation of the Board members and note 31 in the consolidated financial statements.
Yara’s Compensation Committee reviews the performance and proposes terms and compensation for the CEO to the Board of Directors. Future policies for possible option arrangements or share incentive rights (SIRs) will be presented to the Annual General Meeting for approval. The Compensation Committee (Code’s article 9) consists of three members elected by and among the members of the Board. In 2009, the Compensation Committee held six meetings.
Yara’s Audit Committee assists the Board of Directors in assessing the integrity of the Company’s financial statements, financial reporting processes and internal controls, risk management and performance of the external auditor. The Committee conducts an annual self-evaluation according to its mandate. Yara’s Audit Committee (Code’s article 9) consists of three members of the Board, a majority of the members being independent of the company. The Chairperson of the Audit Committee is not the Chairperson of the Board. In 2009, the Audit Committee held seven meetings.
President and CEO
The President and Chief Executive Officer constitutes a formal corporate body, according to Norwegian corporate law. The CEO is responsible for the day-to-day management of the company. Yara’s division of functions and responsibilities are defined in more detail in the Rules of Procedures established by the Board.
Yara’s Executive Management is appointed by the President and CEO to assist in his stewardship duties delegated by the Board and in the day-to-day management of the company. The President and CEO determines the instructions for the Executive Management after prior discussion with the Board. Management instructions, function descriptions and the authority delegated to each member of the Executive Management reflect a joint obligation for these members to safeguard the overall interests of Yara and to develop Yara’s value generation ability.
Risk management (Code’s article 10)
Yara Steering System is one of the pillars of Yara’s internal control system. The steering system provides all employees with an oversight of the prevailing policies and procedures for the group. Compliance with the steering system is monitored by monthly reviews of key performance indicators which cover both financial and operational activities, including health, environmental, safety and quality performance.
Yara’s risk management system, described at page 24-26, aims to reveal both strategic, operational, compliance and financial risks stemming from all levels of the group. Annually, the segment leaders hold workshops to identify new risks and prepare actions to handle the identified risks in their segments. Yara’s Executive Management performs a separate risk evaluation based on a top-down approach. Yara continuously focuses on further formalizing and strengthening the processes related to monitoring control activities and conducting risk management in the group.
The responsibilities related to risk management and internal control of financial reporting are clearly communicated to the relevant organizational units. Yara has implemented structured and standardized reporting procedures, including relevant control activities along the financial reporting line from the local business units and segments to group reporting and analysis.
Yara carries out regular risk assessments of the financial reporting environment. The reporting environment includes monthly monitoring and analysis of reporting from business units. Yara Executive Management performs a quarterly business review with all segment leaders. This is based on established procedures and group accounting policies to ensure that all material accounting and reporting issues are addressed in a timely and uniform manner.
Controls in place
Procedures and control mechanisms have been established to maintain the confidentiality of financial information, and to ensure appropriate communication of financial information internally and externally to all shareholders at the same time.
Yara Internal Audit assists Yara Executive Management by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, controls and governance processes. The Chief Audit Executive reports functionally to the Board of Directors and administratively to the Chief Financial Officer. Yara’s Internal Audit has no direct operational responsibility or authority over any of the activities they review. Internal Audit has unrestricted access to all functions, records, physical properties, and personnel relevant to the performance of engagements, as well as full and free access to the Board of Directors, the Audit Committee and Executive Management.
Yara Steering System includes Yara’s Code of Conduct which aims to ensure that all Yara employees act in a consistent manner and in line with quality standards and business needs. The principles set out in the Code of Conduct are detailed and discussed in an Ethics Handbook and other communications and training material made available to all employees.
All Yara employees are encouraged to raise questions or issues about ethics and compliance matters with line management, the Ethics and Compliance Department or through an externally hosted whistle-blowing system. Yara also has procedures on how to deal with accidents and other unexpected events like natural disasters. Practice drills are conducted to ensure that procedures are operational.
External audit (Code’s article 15)
The external auditor participates in the meetings of the Audit Committee and in the Board meeting that approves the financial statements. In addition, the external auditor meets with the Board without Yara Executive Management being present a minimum once per year. Norwegian laws and regulations stipulate the type of non-audit services that external auditors can perform for Yara. Remuneration to Yara’s external auditor is disclosed in note 32 of the consolidated financial statements.
Shares and shareholders
All Yara shareholders have equal rights and the company has one class of shares (Code’s article 4). Transactions involving own shares, like the share buy-back program, are normally done over the stock exchange, ensuring that market prices are used. Shares redeemed from the Norwegian State are also priced at market value.
There are no restrictions on the purchase or sale of shares by directors and executives as long as insider regulations are adhered to. Certain management compensation programs, including the share-based incentive compensation scheme, mandate the use of a portion of the funds received by management for the purchase of Yara shares and restrict the sale of such shares for varying periods following such purchase.
The company places no restrictions on the transferability of shares (Code’s article 5).
Communication with the financial markets is based on the principles of openness and equal treatment of all shareholders (Code’s article 13). Yara’s website (www.yara.com) contains an updated financial calendar, financial reports and other investor-related information. Yara holds the Information and English certificates of the Oslo Stock Exchange testifying that Yara complies with a set of information requirements beyond defined minimum standards. Yara’s Board of Directors receives regular updates from the Management as to how the company is perceived by the financial markets. Yara has received several awards for its investor communication and financial reporting.
Equity level (Code’s article 3)
Yara’s strong balance sheet is closely linked to the overall strategy, goals and risk position of the company. The dividend policy, which is described in the Report of the Board of Directors and the article on the Yara share, aims to provide a predictable payout over the years. New equity will only be issued when there is a clear business reason behind. Yara executes share buy-back programs as an integral part of its shareholder policy. The rationale behind the share buy-backs is further described in the Report of the Board of Directors.
Takeover attempts (Code’s article 14)
In the event of a take-over attempt, the Board of Directors and Management will give its recommendation to the shareholders as to whether it believes such a transaction will be beneficial to the shareholders. The Norwegian Securities Act regulates take-over attempts. Shareholders at the Annual General Meeting will, according to law, make the decision on a potential take-over bid.
Transactions with closely related parties (Code’s article 4)
In 2009, there were no significant transactions between closely related parties, except for ordinary commercial transactions with subsidiaries and non-consolidated investees. In addition to the mandatory regulations in the Norwegian Public Limited Companies Act (§§ 3-8 and 3-9), Yara uses IFRS rules to define related parties. Related party transactions are disclosed in note 31 of the consolidated financial statements. The members of the Board of Directors and Management are required to disclose all entities that would be considered to be “related parties” under applicable laws and regulations. Transactions with such entities are subject to disclosure and special, independent approval requirements.
Remuneration (Code´s article 12)
Members of the Nomination Committee received remuneration of NOK 4,500 per meeting in 2009.
The Chairperson of the Board of Directors received fixed compensation of NOK 410,000 in 2009, while each of the other board members received NOK 235,000.
The Chairperson of the Audit Committee received fixed compensation of NOK 85,000 in 2009, while each of the other two committee members received NOK 70,000.
Members of the Compensation Committee received remuneration of NOK 5,500 per meeting in 2009.
The Board of Directors determines the remuneration of the President and CEO based on a proposal from the Compensation Committee and decides on the general terms of the company’s incentive plans for officers and certain key employees. The President and CEO decides on the compensation to other members of Yara’s Executive Management. The actual compensation of the management and the company’s corporate bodies in 2009 is disclosed in note 31 of the consolidated financial statements.
Yara’s corporate directives encompass:
- Articles of Association
- Instructions for the Nomination Committee
- Rules of Procedure for the Board
- Internal Audit Charter and Mandate for the Management
- Mandate for the Board’s Compensation Committee
- Mandate of the Board’s Audit Committee
- Insider Regulations
- Code of Conduct