Corporate Governance

SalMar ASA aims to maintain a high standard of corporate governance. Good corporate governance strengthens public confidence in the company and contributes to long-term value creation by regulating the reciprocal roles and responsibilities of shareholders, the board of directors and the company’s management, over and above that which is stipulated in legislation and other statutory instruments. The Oslo Stock Exchange requires that listed companies provide a consolidated account of their corporate governance in accordance with the code of practice drawn up by the Norwegian Corporate Governance Board (NUES). A new version of the code of practice was published 4 December 2007, replacing the previous version of 28 November 2006. The code of practice, which was not revised in 2008, can be found at www.nues.no/English/.

The code of practice shall be adopted in accordance with the “comply or explain” principle. This means that listed companies must report how they have organised themselves in relation to the code’s individual stipulations, and, if appropriate, explain how and why the company has chosen to organise itself in a different way.

Corporate governance
SalMar’s board of directors has determined that the company shall comply with the Norwegian Code of Practice for Corporate Governance.

SalMar has been listed on the Oslo Stock Exchange since May 2007, since when it has worked steadily to comply with the code of practice’s stipulations.

SalMar has always operated its business in line with core values which have been communicated to the organisation, partly through the employees’ participation in the SalMar School, which was set up in 2002 and has been further developed each year since then. These values are based, among other things, on such principles as equality, quality, HSE, focus on the biology and continuous improvement. For further details, please see the chapter on SalMar’s values and culture in the annual report.

SalMar has also drawn up a code of conduct, whose purpose is to safeguard and develop the company’s values, create a healthy corporate culture and uphold the company’s integrity. The code of conduct is also meant to be a tool for self assessment and for the further development of the company’s identity. All employees of the company are bound to comply with the ethical guidelines laid down in the code of conduct, which is available from the company’s website.

The business
SalMar ASA’s objectives are defined in its articles of association (Article 2, see also the company’s website): The objective of the company is sea farming, processing and trading of all types of fish and seafood, and other financial activities in relation to this. The company may, in accordance with directives from the relevant authorities, conduct general investment activities, including participation in other companies with similar or related objectives.

Targets and strategies are drawn up for each production unit. Within the framework of the above article, SalMar is currently engaged in hatchery production, marine phase farming, harvesting, processing and sale of farmed salmon.

The company’s objectives and main strategies are further discussed in the annual report in the chapters “CEO’s report” and “Company Presentation”.

Equity and dividend
As at 31 December 2008 the company had net assets of NOK 1,315 million, which corresponds to an equity ratio of approx. 43 per cent. The board considers SalMar’s equity to be adequate in relation to the company’s objectives, strategy and risk profile.

SalMar intends to provide shareholders with a competitive return on invested capital, taking into consideration the company’s risk profile. Returns will be achieved through a combination of positive share price development and the payment of a dividend. The company plans to pay out surplus liquidity (funds not necessary for the company’s day-to-day operation) in the form of a dividend or by means of a capital reduction with distribution to the shareholders. The company will at all times consider whether the available liquidity should be used for new investments or the repayment of debt instead of being paid out as dividend. Subject to the approval of the Annual General Meeting, it is intended that a dividend be paid annually. The board of directors is proposing a dividend for 2008 of NOK 0,40 per share, or NOK 41.2 million in total.

Board authorisation
The Annual General Meeting of 21 May 2008 authorised the board to increase the company’s share capital by up to NOK 7.5 million, though the issue of no more than 30 million shares, each with a face value of NOK 0.25. The authorisation is valid until the 2009 AGM. The authorisation may also be used to finance investments and the acquisition of businesses through cash issues and contributions in kind. Moreover, the authorisation may be used in connection with the share option scheme for senior executives. Given the purpose of the authorisation, the board of directors may need to set aside the preference rights of existing shareholders. Such a move is allowable under the terms of the authorisation.

The AGM of 21 May 2008 also authorised the board of directors to acquire the company’s own shares with a face value of up to NOK 2.75 million, which corresponds to 10 per cent of share capital. The price of shares acquired could range from not less than NOK 1 to not more than NOK 100. The authorisation was exercised 14 November 2008 to acquire 600,000 shares at a face value of NOK 150,000 and a price per share of NOK 31. The authorisation is therefore still valid for the purchase of shares with a face value of up to NOK 2,425 million, corresponding to around 9.4 per cent of the company’s share capital. The authorisation remains valid until the 2009 AGM.

Non-discrimination of shareholders and transactions with closely related parties
SalMar’s registered share capital totals NOK 25,750,000, divided between 103,000,000 shares. Each share has a face value of NOK 0.25. SalMar has only one class of shares and all shares have equal rights. Each share carries one vote. In the event of material transactions with closely related parties, the company shall make use of valuations provided by an independent third party.

SalMar’s code of conduct lays out what is required of employees with respect to loyalty, conflict of interest, confidentiality and guidelines for trading in the company’s shares. The code of conduct states that all employees must notify the board if they, directly or indirectly, have a material interest in any agreement entered into by the company.

The regulations governing the board’s working practices provide guidelines for how individual directors and the CEO should conduct themselves with respect to matters in which they may have a personal interest. Among them is the stipulation that each director must make a conscious assessment of his/her own impartiality, and inform the board of any possible conflict of interest.

Free transferability
The company’s shares are freely transferable on the Oslo Stock Exchange and its articles of association do not contain any restrictions on the shares’ transferability.

General Meeting of Shareholders
The company’s highest decision-making body is the General Meeting of Shareholders. In accordance with the company’s articles of association the Annual General Meeting must be held by the end of June each year.

An invitation to attend, as well as all agenda papers is published on the company’s website no later than 21 days prior to the date of the AGM. All shareholders whose address is known to the Norwegian Central Securities Depository (VPS) will be sent the documents by post no later than 14 days prior to the date of the AGM. Shareholders are entitled to make proposals and cast their votes either in person or through a proxy. Shareholders must notify the company of their intention to attend the AGM no later than five working days before the AGM takes place.

In all matters relating to the preparation of, invitation to and staging of the company’s AGM the company complies with the Norwegian Code of Conduct for Corporate Governance.
The AGM for 2009 will take place on 28 May at Frøya.

Nomination Committee
The company’s articles of association stipulate that the Nomination Committee shall comprise a total of three people, who shall be shareholders or shareholders’ representatives. The members of the Nomination Committee, including the committee’s chair, are elected by the Annual General Meeting. The AGM of 21 May 2008 elected Gustav Witzøe (2 years), Endre Kolbjørnsen (2 years) and Therese B Karlsen (1 year) as SalMar’s Nomination Committee. The Nomination Committee recommends candidates for election to the board of directors and directors’ fees. The remuneration payable to members of the Nomination Committee is determined by the AGM. A set of regulations governing the work of the Nomination Committee was adopted at the board meeting of 21 March 2008.

Corporate Assembly and Board of Directors, composition and independence
The company does not have a Corporate Assembly. The articles of association stipulate that the board of directors shall comprise three to seven members, to be elected by the Annual General Meeting. The board’s chair is elected by the AGM, while the board itself elects a deputy chair. The company’s current board is made up of six members, including two women and one employee representative.

The regulations governing the work of the Nomination Committee state that emphasis shall be placed on ensuring that members of the board have the necessary competence to carry out an independent assessment of the matters presented to it by management and of the company’s business activities. Emphasis shall also be placed on ensuring that there is a reasonable gender balance and that directors are independent with respect to the company. The Nomination Committee’s recommendation shall meet the requirements relating to board composition stipulated by applicable legislation and the regulations of the Oslo Stock Exchange. Board members are elected for a term of two years.

The composition of the board meets the Code of Practice for Corporate Governance’s stipulations with respect to independence, with one exception. Gustav Witzøe is both a SalMar manager and a member of the board of SalMar ASA. In the opinion of the board it is in the company’s interests to avail itself of Gustav Witzøe’s extensive experience and considerable expertise, both as head of part of the business and as a director. Deviation from the code of practice on this point has therefore been deemed acceptable.

In 2008 the board did not have a deputy chair. A deputy chair will be elected in 2009.

The work of the board
The board has overall responsibility for the management of the Group and the supervision of its day-to-day management and business activities.

The work of the board is governed by a set of regulations which describe the board’s responsibilities, tasks and administrative procedures. Furthermore, the board determines the Group’s overall objectives and strategy, including the overall composition of the Group’s portfolio and the business strategies of the individual business unit.

Strategy is normally discussed during the autumn, ahead of the Group’s budget process. Within the area of strategy, the board shall play an active role in setting management’s course, particularly with regard to organisational restructuring and/or operational changes.

The board shall approve the Group’s plans and budgets, and may, if desired, draw up more detailed guidelines for its operations. The board shall, no later than December, approve the Group’s budgets for the coming year. Proposals relating to targets, strategies and budgets are drawn up and presented by management.

The board makes an annual assessment of its own work and competence. An evaluation of this kind was conducted in December 2008.

The company evaluates the use of board sub-committees on a regular basis, but has so far not established any such bodies.

Risk management and internal control
The board ensures that the company’s internal control systems are adequate in relation to the regulations governing the business. The company’s systems and procedures for risk management and internal control are intended to ensure efficient operations, timely and correct financial reporting, as well as compliance with the legislation and regulations to which the company is subject.

The follow-up of internal controls relating to financial reporting is undertaken by means of management’s day-to-day monitoring, the process owners’ monitoring and the auditor’s independent testing. Deviations and improvement opportunities are followed up and corrective measures implemented. Financial risk is managed by a central unit at head office, and, where appropriate, consideration is given to the use of financial hedging instruments. The auditor has confirmed that the company’s internal controls relating to financial reporting are adequate.

A vital part of the senior management team’s efforts is devoted to the identification and management of biological risk, fish health, HSE and general hygiene. It is the CEO’s responsibility to ensure that the company complies with all relevant legislation and guidelines governing the operation of its divisions. This includes the procurement, operation and maintenance of fish farming equipment, as well as management of the company’s biomass.

Follow-up and control of the extent to which the company’s values and code of conduct are complied with is carried out by the line organisation and is part of day-to-day operations. Material risks and any changes in them are discussed at management meetings every fortnight.

In 2008 the board initiated an overall review of the company’s total risk picture.

The most important risk factors for the company include financial risk associated with foreign exchange, credit and interest rates, and biological risk associated with the state of health at the company’s hatchery and fish farming facilities. These risk factors are monitored and addressed by managers at all levels in the organisation. For further information on this matter, please see the report of the board of directors and Note 19 to the financial statements.

Directors’ fees
The Nomination Committee’s proposal for the remuneration payable to the board of directors for 2008 will be laid before the company’s Annual General Meeting of 28 May 2009. The directors’ fees shall reflect the board’s responsibilities, competence, time spent and the complexity of the business.

Directors’ fees are not performance-related and contain no share option element. Additional information relating to directors’ fees can be found in Note 3 to the financial statements.

As a consequence of his position with SalMar, Gustav Witzøe has received remuneration from the company in addition to his fee as a director. Please see the section relating to the board’s composition for an explanation of Mr Witzøe’s directorship.

Remuneration to senior executives
The company’s board of directors has drawn up a declaration relating to the determination of salaries and other benefits payable to senior executives. This declaration was approved by the company’s Annual General Meeting of 21 May 2008. The company shall offer competitive terms and conditions in order to attract and retain key personnel with the necessary competence.

The declaration refers to the fact that the board of directors shall determine the salary and other benefits payable to the CEO. The salary and benefits payable to other senior executives are determined by the CEO in accordance with the guidelines laid down in the declaration. Pursuant to the authorisation given to the board of directors, a share option scheme has been established for key personnel. Today’s compensation scheme is divided into three and comprises a fixed salary, a performance-related bonus and a share option scheme in line with the board’s authorisation.

Information relating to the salary and benefits payable to the CEO and other senior executives can be found in Note 3 to the financial statements.

Information and communication
Communication with shareholders, investors and analysts is a high priority for SalMar. The objective is to ensure that the financial markets and shareholders receive correct and timely information, thus providing the soundest possible foundation for a valuation of the company. The company has adopted an “IR policy” which is available from its website.

The company holds open investor presentations in association with the publication of its year-end and interim results. Such investor presentations are also made available on the company’s website.

The company shall publish its provisional year-end accounts by the end of February each year. A complete annual report shall be distributed to all shareholders no later than 14 days prior to the Annual General Meeting. The latest published financial information can always be obtained from the company’s website.

The CEO and CFO are responsible for communications with shareholders other than in connection with the AGM.

Acquisition
The board of directors concurs with the principle of non-discrimination of shareholders. The board undertakes to act in a professional manner and in accordance with applicable legislation and regulations. Accordingly, the board agrees to abide by the principles laid down in the Code of Practice for Corporate Governance relating to the board’s responsibilities and duties in a takeover situation.

Auditor
The company’s auditor is appointed by the Annual General Meeting and is independent of SalMar ASA. Each year the board of directors shall receive written confirmation from the auditor that the requirements with respect to independence and objectivity have been met.

The auditor shall draw up the main lines of a plan to carry out the audit, and the plan shall be made known to the board of directors. Furthermore, the auditor shall hold at least one meeting each year without any representatives of the company’s management being present.

The board shall inform the AGM of the remuneration payable to the auditor, broken down into an auditing and other services component. The AGM shall approve the auditor’s fees.

The company has drawn up guidelines for any work other than auditing to be carried out by the auditor or persons associated with the auditor.

The auditor participates in board meetings in connection with the treatment of the year-end accounts, and, at the same time as the board of directors, reviews the company’s internal control systems. This includes the identification of weaknesses and proposals for improvement. The auditor will also attend the company’s AGM.