Corporate Governance 

“Ekornes shall be known for its honesty, credibility and consistency towards shareholders, employees, customers, suppliers, other business associates and the public authorities, and shall be recognised as a caring company (Ekornes Cares). Ekornes shall be perceived as dependable, efficient and well-run, such that the company is held in high regard by all sections of society.”

Norwegian recommendation

Ekornes’s board of directors and group management supports the Norwegian Recommendation for Corporate Governance. The recommendation has been reviewed to ensure that it is complied with.

Business

Ekornes shall be one of the most attractive and leading brand name suppliers of furniture and mattresses for home use, both nationally and internationally. The company’s articles of association are more general with regard to defining what business activities the company shall undertake. Clause 2 of the company’s articles of association states: “The company’s purpose is to operate business activities and whatever may be associated with this, including participation in other companies.”
 
The strategies, goals and values that apply to the company’s business are set out in its handbook “Objectives and Values for the Ekornes Group”. This is available as a separate document. Please refer to this document for details of the company’s goals and overarching strategies.

Equity

Ekornes shall have an equity ratio of at least 40-50 per cent.

Dividend policy

Ekornes will manage its shareholders’ investments in such a way that their return, measured as the sum of dividend and increase in share price, is as high as possible over time. The  company aims to pay a dividend each year. At least 30-50% of the profit after tax will be paid as dividend. However, account will be taken of the level of capital expenditure and the rate of growth. The company will strive for stability as far as its dividend policy is concerned.
 
The board proposes that a dividend of NOK 7.50 per share be paid out. This corresponds to approx. 81 per cent of the year’s profit after tax.

Authorisation of the board of directors

Authorisation with respect to a private placement of up to 3.0 million shares in connection with share option schemes which may be exercised in 2003 and 2004 if the share price criteria should be met. This authorisation, which was granted by the company’s AGM in 2003, was exercised in February 2004 and stipulates the following:
 
“Pursuant to Section 10-14 of the Public Limited Companies Act, the board of directors of Ekornes ASA is hereby authorised to increase the company’s share capital by up to 3,000,000 shares, each having a face value of NOK 1.”
 
“Shareholders waive their preferred subscription rights in that the shares will be awarded to those holding rights under the share option scheme. The subscription price of the shares issued will correspond to the price stipulated in the approved scheme. The amount subscribed to shall be paid in cash 14 days after the close of the subscription period. Other conditions in respect of the private placement shall be determined by the board of directors. This authorisation is valid until the 2005 AGM of Ekornes ASA. The authorisation will be registered in the Register of Business Enterprises as soon as possible.”
 
Furthermore, in connection with the employee share bonus scheme for 2004, authorisation was also granted for the purchase of up to 1 per cent of the company’s own shares. The authorisation was granted by means of a resolution adopted by the AGM held on 6 May 2004 and stipulates the following:
“Pursuant to Section 9-4 of the Public Limited Companies Act, the board of directors of Ekornes ASA is hereby authorised to acquire shares in Ekornes ASA with a face value totalling up to NOK 1,034,348.
 
“When acquiring shares in Ekornes ASA, not less than NOK 30 and not more than NOK 200 shall be paid for each share having a face value of NOK 1. In the event of any change in the face value of the share, the above-mentioned figures shall be adjusted correspondingly. The board of directors is free to determine how the company’s own shares shall be bought and sold, providing all shareholders are treated equally. This authorisation is valid until the 2005 AGM.” The authorisation is registered in the Register of Business Enterprises.”

Equal treatment of shareholders and transactions with closely related parties

The company has only one class of shares. In principle, existing shareholders have preference rights with respect to any share capital increase. Particular circumstances may result in this principle being waived. A proposal explaining the reason for such a waiver will then be put to a general meeting of shareholders for a final decision. The general meeting has authorised limited purchases of own shares in order to acquire from the stock market the number of shares required in respect of the bonus and option schemes in effect at any time. All trading in own shares is to be conducted through the stock market. Otherwise, the company abides by the proposed guidelines for transactions with closely related parties, under the terms of which valuations by independent third parties and notification to the board of directors shall be carried out in the event of not immaterial transactions or material interests.

Freely transferable

Clause 5 of the company’s articles of association states: “Shares are freely transferable”.

General meeting

The annual general meeting for 2005 takes place on 11 May 2005. The company’s procedures and arrangements with regard to the holding of the AGM are in complete compliance with the guidelines set out in the “Norwegian Recommendation for Corporate Governance”. The invitation to the AGM and the minutes are available from the company’s website, www.ekornes.com, under Investor Relations.

Election Committee

The requirements with respect to the election committee are set out in Clause 9 of the company’s articles of association. The election committee shall comprise four members elected by the general meeting. Information regarding committee members’ names, etc, is included in the minutes of the general meeting. None of the election committee’s members are company directors or members of group management.

Corporate Assembly and board of directors, composition and independence

The company does not have a Corporate Assembly. The board of directors comprises five members elected by the shareholders, and three members and one observer elected by and from the workforce. An agreement with the employees, approved by the Company Democracy Committee, underpins this arrangement. The majority of shareholder-elected directors are independent, both with respect to group management, important business associates and the main shareholders.
 
The fact that the company does not have a Corporate Assembly has been approved by the liaison committee. Directors are elected by the general meeting of shareholders for a term of two years. No member of group management is a director. For further details of directors’ backgrounds, competence, capacity and affiliation, please see the presentation of the board elsewhere in this annual report.

Board responsibilities

Norwegian law lays down the tasks and responsibilities of the board of directors. These include the overall management and supervision of the company. Towards the end of each year the board adopts a detailed plan for the following financial year. This plan covers the follow-up of the company’s operations, internal control, strategy development and other issues. It also includes a discussion and assessment of the board’s experiences and the organisation of its own activities, with proposals for improvement. The company’s internal control activities are reviewed at at least one board meeting a year. The company’s auditor is also present at this meeting.
 
The board held 10 meetings in 2004, eight of which were regularly scheduled. The board emphasises the need to rotate the venue for its meetings to different operational units, both in Norway and abroad. This also includes visiting certain of the company’s customers (dealers).

Directors’ fees

Directors’ fees are determined by the general meeting. Directors’ fees are not performance related and share options are not granted to directors elected by the shareholders. All forms of remuneration to the company’s directors are specified in the Notes.

Remuneration to senior executives

The remuneration policy for senior executives is determined by the board of directors. The CEO’s compensation package is determined at a meeting of the board. The framework for share option schemes is determined by the board. There are currently no such schemes. All elements of the remuneration paid to the CEO and board members are specified in the Notes.

Auditor

Each autumn the auditor prepares a plan for auditing activities in the coming year. The auditor attends the board’s review of the company’s internal control activities and provides his assessment of the status of the company’s accounting practices, reporting requirements and internal controls. For large-scale consultancy projects, Ekornes uses qualified providers other than the company’s auditor, to comply with the requirement for auditor independence. However, the auditor is used in connection with activities that are closely related to the auditing function, such as assistance with the preparation and verification of the financial statements and tax returns, interpretation of accounting and tax regulations, and as a discussion partner with respect to audit-related matters.

Information and communication

A calendar of the most important dates is published on the company’s website. Information to the company’s shareholders is distributed via the Oslo Stock Exchange and the company’s website on an ongoing basis, immediately after decisions have been made.  All interim reports and documents connected with general meetings are also sent direct to shareholders. The company’s management holds open presentations in connection with the publication of each interim report. Corporate management also holds regular meetings with financial analysts, investors and shareholders throughout the year.

Communications strategy

Ekornes is subject to the Oslo Stock Exchange’s regulations regarding information which may influence the price of Ekornes’s shares. Taking this into consideration, the company’s goal is for all employees to be well informed about the company’s situation at all times. The company also wishes employees to be well informed about what is happening in other parts of the organisation. Management shall ensure that the flow of such information is systematic and its publication predictable. Moreover, Ekornes shall be associated with integrity, candour and high ethical standards. A separate internal communications plan has been prepared. The exchange of information with dealers and suppliers shall be strengthened to promote mutual understanding for each party’s strategy and actions.

Ekornes will develop its IT systems to improve the day-to-day flow of information between group companies and key dealer organisations and suppliers. For its part, Ekornes aims to rationalise its operations through the implementation of new IT systems. Ekornes’s own information and communication system will be constantly updated to promote increased productivity.