Corporate governance

    Novozymes has developed effective management systems over many years and regularly updates these systems to reflect changes in legal requirements, new business developments and stakeholder expectations. A cornerstone of these management systems is Novozymes’ corporate governance structure.

    Board of Directors: composition and responsibilities

    In accordance with Danish legislation, Novozymes has a two-tier management system comprising the Board of Directors and the Executive Leadership Team, with no individual being a member of both. The division of responsibility between the Board of Directors and the Executive Leadership Team is clearly outlined and described in the Rules of Procedure for the Board of Directors and Rules of Procedure for the Executive Leadership Team, available at www.novozymes.com.

    Novozymes’ Articles of Association require the Board of Directors to have four to eight members elected at the annual shareholders’ meeting. Currently, the Board has six such members. They are elected for one year at a time and cannot be elected or re-elected after reaching the age of 70. Nominations are based on an evaluation of factors such as competencies, diversity, independence and prior performance of current members. The Board of Directors also includes three members elected by employees, who serve four-year terms.

    The Board of Directors is accountable to the company’s shareholders for the way the company conducts its business. The composition of the Board of Directors must therefore be such that the combined competencies of the Board enable it to inspire, guide and oversee the company’s development, and diligently address and resolve the issues and challenges faced by the company at any time.

    In order to secure the right competencies and promote diversity, the following targets have been set for the composition of the Board of Directors:

    1. At least half of the shareholder-elected board members shall be independent in accordance with the Danish Code on Corporate Governance
    2. At least 40% of the shareholder-elected board members shall have substantial international experience from the management of large corporations or institutions headquartered outside Denmark
    3. One-third or more of the shareholder-elected board members shall be female, and one-third or more of the shareholder-elected board members shall be male

    All targets were met in 2013, and the third bullet fulfills the requirements of section 99b of the Danish Financial Statements Acts.

    The required competencies are defined in a competency profile that specifies various personal characteristics, skills and experience. The individual competencies of the members of the Board of Directors are shown in the section Board of Directors & Executive Leadership Team.

    The Board’s main responsibilities are to:

    • Ensure the right management and organizational structure
    • Supervise financial, social and environmental performance and the Executive Leadership Team’s day-to-day running of the company
    • Decide the overall management and strategic development of the company

    For an overview of the tasks performed to fulfill these responsibilities, see the diagram A year with the Board of Directors.

    “The Board of Directors is accountable to the company’s shareholders for the way the company conducts its business.”

    Illustration-Ayearwiththeboard.png

    A year with the board of directors

    A Chairmanship has been established in accordance with the Articles of Association and the Rules of Procedure for the Board of Directors. It has two members – the Chairman, Henrik Gürtler, and the Vice Chairman, Kurt Anker Nielsen – and is responsible for assisting the Board of Directors in matters concerning the Executive Leadership Team’s remuneration and nomination, and in overseeing the Executive Leadership Team’s day-to-day running of the company and reporting back to the Board of Directors. The Chairmanship is also responsible for planning and preparing meetings of the Board of Directors, preparing material for the nomination of candidates for election to the Board of Directors, and recommending remuneration for the Board of Directors and the Executive Leadership Team.

    In addition, the Board of Directors has established an Audit Committee. The Audit Committee assists the Board of Directors in monitoring aspects relating to accounting, auditing, internal control and financial reporting.

    As part of the internal control system, all cases of fraud and concerns raised, either through Novozymes' Whistleblower Hotline or directly by internal or external personnel, are reported to the Audit Committee. All allegations of fraud are investigated, appropriately dealt with and then closed. Substantiated fraud will lead to proportionate disciplinary sanctions for the parties involved and is likely to result in a police report being filed, although this will be evaluated on a case-by-case basis. Two cases of substantiated fraud were reported in 2013, with both cases leading to the dismissal of employees and one being reported to the police.

    Further information about the Audit Committee can be found at www.novozymes.com.

    "Novozymes works within the parameters of Touch the World and has committed to principles derived from the UN Global Compact and UN Convention on Biological Diversity.”

    Charters and recommendations

    In laying down the management principles for Novozymes, the Board of Directors has followed the Recommendations on Corporate Governance that form part of the disclosure requirements applicable to companies listed on Nasdaq OMX Copenhagen. These recommendations are available at www.corporategovernance.dk. The recommendations were revised in 2013. The revision had only a minor impact on Novozymes, and the changes were adopted during the year. A detailed review of Novozymes’ position on all of the recommendations and a description of the internal control and risk management system relating to financial reporting can be found in the statutory report on corporate governance pursuant to section 107b of the Danish Financial Statements Act, under Corporate Governance at www.novozymes.com.

    The recommendations require companies to explain any noncompliance. Novozymes follows 43 of 47 recommendations, the exceptions being:

    • Nomination and remuneration committees have not been set up. Instead, these responsibilities are laid down in the Charter for the Chairmanship (Recommendations 3.4.6 and 3.4.7)
    • The remuneration policy for the Executive Leadership Team contains no specific clause on the repayment of variable remuneration components paid on the basis of misstated information, as Novozymes considers the rules in Danish law to be sufficient in such cases (Recommendation 4.1.2)
    • Due to the limitations imposed by the Novo Nordisk Foundation’s articles of association and Novozymes’ ownership structure, the Board of Directors reserves the right in certain circumstances to reject takeover bids without consulting shareholders (Recommendation 1.3.1)

    Novozymes also works within the parameters of Touch the World – a document outlining our values and commitments – and has committed to principles derived from the UN Global Compact and UN Convention on Biological Diversity.

    Other Board-related information

    The Board of Directors held eight meetings in 2013, with an overall attendance rate of 94%.

    Changes to the Articles of Association require that shareholders representing at least two-thirds of the total number of votes in the company are represented at the shareholders’ meeting, and that at least two-thirds of the votes cast, as well as two-thirds of the voting capital represented at the meeting, vote in favor of the proposal to change the Articles of Association. The annual shareholders’ meeting has authorized the Board of Directors to allow the company to acquire treasury stock on an ongoing basis to the extent that the nominal value of the company’s total holding of treasury stock at no time exceeds 10% of its common stock, cf. section 198 of the Danish Companies Act. The purchase price must not deviate by more than 10% from the price quoted on Nasdaq OMX Copenhagen on the date of acquisition. The authorization applies until March 1, 2017.

    Each year, one of the responsibilities of the Board of Directors is to assess whether the ownership structure with A and B common stock is optimal. The Board of Directors remains of the opinion that this is the best way to safeguard Novozymes’ long-term development to the benefit of the company’s shareholders and other stakeholders.

    Novozymes is party to a number of partnership contracts that can be terminated by the other party in the event of significant changes in the ownership or control of Novozymes. A few contracts contain provisions that restrict Novozymes' licenses to use specific forms of technology in such situations.

    Novozymes is party to contracts where managerial staff can claim compensation in case of resignation, dismissal or redundancy due to a takeover bid.