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Corporate Governance
Telenor considers good corporate governance to be a necessary
requirement for value creation and trustworthiness, and for access to capital.
Telenor’s principles of good corporate governance have been developed independently,
within the framework of the regulations, requirements and recommendations the
activities are subject to.
Good Corporate Governance, Ethics and
Social responsibility
In this context good corporate governance means open interaction and cooperation
among the company’s owners, the Corporate Assembly, the Board and Group
Management, as well as other interested parties such as the Group’s employees,
customers, suppliers, creditors, public authorities and society in general,
etc.
The presentation given herein is seeking to reflect that Telenor,
when engaging in corporate governance, includes all these interested parties
in an integrated and comprehensive way.
Earning public trust is essential for all companies. When submitting
reports, Telenor provides both financial and non-financial information, emphasising
transparency so that interested parties may be able to make informed decisions.
Telenor also focuses on individual responsibility and personal integrity –
values that will be promoted by concentrating on value-based leadership and
business ethics. Social, competitive and industrial development will involve
changes and restructuring. Flexible employees and a pliable organisation will
be pivotal in achieving a successful development.
Telenor is subject to rules and regulations applicable in Norway
as well as the countries where the Group conducts business. Telenor’s shares
are listed on the Oslo Stock Exchange and Nasdaq in the US. As an issuer of
shares the company must comply with both Norwegian and US stock exchange rules.
Listing on Nasdaq involves compliance with regulations promulgated by the Securities
Exchange Commission and Nasdaq, and the sarbanes-Oxley Act (SOA), which includes
strict requirements and internal controls relating to financial reporting.
Telenor’s good corporate governance principles are formulated
independently. However, rules, requirements and recommendations to which the
company is subject are included in the overall framework for good corporate
governance. The Group Management is responsible for ensuring the existence of
internal rules, procedures and structures which can efficiently secure value
creation, and where i.a. authority and responsibilities are clearly set out
and mutually understood.
Experience shows that Telenor’s established values are
closely connected with the values created by the company. In order to secure
long-term value creation the Board will ensure that Telenor’s values are
firmly anchored in the organisation and that the company’s activities are
based on responsibility and good business practice at all levels.
Telenor’s Codes of Conduct have been adopted by the Board
and are a key management tool for Telenor’s activities. The Codes of Conduct
cover areas which are important for securing good business ethics in all aspects
of the Group’s activities. They contain specific and practical rules, and
set the standards for how individual employees should proceed when, in their
daily work, they are faced with competition and demands for meeting business
objectives. Failure to comply with the Codes of Conduct will result in sanctions
adapted to suit the nature and extent of the violation in question. The Codes
of Conduct apply to Board members, managers, employees, hired staff and anyone
acting on behalf of Telenor. During 2004 the Codes of Conduct were implemented
at the Norwegian and international companies of which Telenor has operational
control.
In order to make it easier to understand and comply with the
Codes of Conduct, Telenor has developed an interactive, computer-based training
programme whereby employees are confronted with a number of ethical dilemmas
of varying degrees of difficulty. The dilemmas are presented as video inquiries
received from fictitious employees around the world who are faced with an ethical
dilemma in their work situation, which they need help resolving. The individual
participants provide advice based on their understanding of the Codes of Conduct.
A recurring element in the feedback provided in the programme is that employees
should always seek help and advice in difficult situations, and always report
irregularities. The training programme was implemented at Telenor’s Nordic
companies during the final quarter of 2004, and will be implemented at the Group’s
other international companies during the first quarter of 2005.
On the basis of the company’s values and Codes of Conduct,
Telenor’s Ethical Council will promote ethical awareness within the Group.
The Ethical Council is an independent forum which can bring up for discussion
matters relating to ethics and reputation. The Council has no decision-making
authority, but may make recommendations to Telenor’s Group Management.
The Council is chaired by the Chief Executive Officer and is otherwise composed
of individuals from different parts of the Group.
Telenor currently conducts business in countries in which corruption
and business ethics issues represent a challenge. Telenor’s activities
may serve to illustrate that it is possible to achieve success in business in
demanding markets without compromising adopted ethical principles or international
norms. Telenor will not tolerate corruption and works to prevent corruption
at all levels of the organisation. The most important measures employed by the
Group in the fight against corruption involve ensuring a common business ethics
platform at all companies where Telenor has operational control, training of
individual managers and employees in how to deal with situations involving ethical
dilemmas, and ensuring that ethical issues may be raised and discussed in all
units in the Group. These efforts are therefore not undertaken simply to protect
Telenor’s reputation, but contribute to secure sustainable trade and industry
in the countries where Telenor conducts business.
Telenor’s efforts to ensure socially responsible business
conduct involve more than just good business ethics at all levels. They concern
the manner in which we treat our employees, our relationship to nature and our
surrounding environment, our efforts to ensure safe products, as well as a number
of other factors. More information can be found on www.telenor.com/csr/
In 2005 Telenor will continue the work undertaken to ensure
that guidelines, training and control mechanisms are up to date and adequate,
and that they meet both Telenor’s own requirements as well as the justified
expectations of other interested parties. During 2005, Telenor’s internal
rules will be adapted to new US requirements placing greater focus on internal
controls relating to financial reporting. One such requirement relating to internal
control of financial reporting involves good, efficient Corporate Level Controls.
The adaptations will also take into account Telenor’s requirements relating
to value-driven management, operational excellence and strategic direction.
The adapted internal rules will also be implemented at international subsidiaries.
Internal and external rules and procedures provide Telenor
with a sound platform for good corporate governance and for further development
of a positive, responsible and healthy corporate culture. Telenor works systematically
to install responsibility at all levels of the Group’s activities –
a requirement to successfully achieve the Group’s goals of long-term value
creation. Such responsibility is also important in relation to Telenor’s
customers, owners, employees, joint venture partners, competitors, public authorities
and other interested parties. Business ethics has featured prominently in Telenor’s
work on social responsibility.
Overview
Owners’ interests – Annual
General Meeting (AGM)
The owners’ interests are primarily ensured through the company’s
Annual General Meeting and by those members of the company’s other bodies
who are elected by the shareholders. The AGM is the company’s highest authority.
Telenor encourages as many shareholders as possible to exercise their rights
by attending the AGM, and aims to ensure that the AGM remains an effective meeting
place for shareholders and the Board. The shareholders receive agenda papers,
including the Nomination Committee’s recommendations, at least two weeks
prior to the AGM. Agenda papers are prepared in such a way as to enable shareholders
to make decisions about all items for discussion. The deadline for registration
is set as close to the meeting as possible, and accords with the company’s
Articles of Association, i.e. three days before the AGM. Shareholders who are
unable to attend may vote by proxy. The Board and the company’s auditor
are present at the AGM, and so are the representatives who sit on the Nomination
Committee when an election appears on the agenda of the AGM. The company has
adopted procedures to ensure independent chairmanship of the AGM by stipulating
in the Articles of Association that the Chairman of the Corporate Assembly shall
chair the company’s AGM.
By pursuing its main objective of creating value for owners,
the Board of Telenor attends to the interests of the shareholders. The Board
also ensures the interests of others, e.g. employees, customers, creditors and
society in general. Accordingly, such interests form an integral part of good
corporate governance at Telenor.
It is important that the owners are aware of their responsibilities
when exercising their ownership rights and control through the company’s
various bodies, and that management relates to these bodies as active and operative
corporate bodies. More than 50% of Telenor is owned by one single shareholder
– the Kingdom of Norway through the Ministry of Trade and Industry. Telenor
is of the opinion that the Ministry of Trade and Industry does not exert any
undue influence over the company. The expressed aim of the Ministry of Trade
and Industry’s ownership of Telenor is to secure optimal value and to secure
national anchoring of the activities, cf. P. 119 of White Paper no. 22 (2001–2002).
In its capacity as owner, the Ministry of Trade and Industry is subject to more
clearly defined principles relating to ownership, cf. Pp. 9 and 52 of White
Paper no. 22 (2001–2002). The Ministry of Trade and Industry’s ownership
management shall be based on 10 principles relating to good ownership. Cf. Pp.
9 and 52–59 of White Paper no. 22 (2001–2002), including equal treatment
of shareholders, transparency with respect to Ministry of Trade and Industry’s
ownership, owner decisions and resolutions shall be made at the AGM and the
composition of the Board shall ensure expertise, capacity and diversity reflecting
the distinctive nature of the individual companies concerned.
Overview
Activities, strategic focus areas
and management model
Telenor’s activities are clearly set out in the company’s Articles
of Association, and its stated objectives and main strategies lie within the
framework provided by the Articles. The object clause of the Articles of Association
and the company’s objectives and main strategies are presented in the Annual
Report. See page 153.
The Group’s strategy identifies three main focus areas,
i.e. strategic direction, operational excellence and value-driven management,
as being important in respect of the realisation of Telenor’s goals.
Strategic direction comprises a number of factors, the main
one being further development of Telenor as an international mobile company
with long-term industrial ownership within limited geographical areas. It also
comprises Telenor’s “control or exit” strategy, whereby the company
will seek to dispose of activities of which it is impossible or undesirable
to gain operational control. It also involves a commitment to seek new opportunities
for mobile expansion in defined markets, and selective Nordic expansion opportunities,
mainly in mobile. Strategic direction also involves continued development of
Broadcast as the leading TV distributor in Norway, as well as the realisation
of values in non-critical ownership positions.
Operational excellence involves stronger and clearer customer
orientation, as well as simplification, standardisation and perfection of products
and processes. Furthermore, it also involves a focus on optimising operations
in the domestic market, the Nordic region and internationally. In 2004 a considerable
amount of work was undertaken to improve efficiency. This overall effort was
focused on developing Telenor towards a more simplified and more customer-oriented
company. This work is continued with new areas of focus in 2005. Value-driven
management means that managers should be rewarded for their contributions in
respect of achieving financial results as set out in the company’s business
plan, and also for their contribution to the development of the organisation
in accordance with Telenor’s management requirements.
Telenor’s management requirements constitute a framework
relating to how the company’s style of management should be developed and
how individual managers should develop within Telenor. These management requirements
thus define the framework for management at Telenor, and also take into account
the different markets and cultures in which the Group conducts business. In
2004, these management requirements were incorporated into and reviewed by all
the management groups at Telenor’s Norwegian companies. Implementing these
requirements at the international companies of which Telenor has operational
control will be completed in 2005. In addition to general management requirements,
Telenor has initiated an integrated process designed to evaluate, develop and
reward managers in accordance with Telenor’s own leadership demands and
business results; Telenor Leadership Development Process (TLDP). This process
provides details of overall management capacity, management teams, key positions
– and the extent to which Telenor recruits relevant expertise. Under this
process, candidates for key positions are identified, along with the training
required to fill such positions. Talents are also identified, as are candidates
for future management positions. TLDP also provides details relating to career
objectives for managers, and also reflects the diversity relating to e.g. gender
and nationality. In 2004, TLDP was implemented for around 70% of all managers
at Telenor. The process will be completed in 2005.
Telenor has established a management model under which targets
are set and results followed up in a systematic manner. This applies to a number
of financial parameters such as operating profits, capital yield and cash flow.
It also applies to a number of non-financial parameters such as Telenor’s
position in the market, its capacity for innovation, internal procedures and
role as an employer. These matters are followed up in Business Reviews, at Board
meetings and under the company’s incentive system.
Overview
Company capital and dividends
Telenor’s goal of creating value for its owners means a continuous
focus on ensuring that the company’s equity is adapted to the company’s
objectives, strategy and risk profile. The Board believes that Telenor is best
served by drawing up a long-term and predictable dividend policy. This corresponds
with the objective of providing its shareholders with a return on their investments
at least equal to alternative investments with similar risk profiles. Such return
should come in the form of cash dividends and increased share value. Telenor’s
repurchases of treasury shares, undertaken in 2004, must be seen in this context.
Telenor shares should be seen as liquid and interesting investment opportunities.
Recent improvements in equity and cash flow enable Telenor to transfer value
to shareholders in the form of increased dividends, as well as through the repurchase
of shares. Based on Telenor’s financial position and anticipated capital
requirements, the Board accounted for an amendment to dividends policy at the
AGM in 2004. The aim is for shareholders to be paid annual dividends amounting
to 40–60% of normalised annual profits, and the company is aiming for a
relatively even growth in annual ordinary dividends per share. In 2004 the AGM
authorised the Board to repurchase shares and also granted issue authority for
a period of one year, i.e. until the AGM in May 2005.
Overview
Transferral rights, equal treatment
of shareholders and transactions with close relatives/friends
Telenor’s shares are freely transferable and have no trading restrictions
in the form of Board consent, ownership limitations, etc. All Telenor shareholders
have the same status through one class of shares. Telenor strictly adheres to
the principle relating to equal treatment of shareholders. This is also reflected
in the fact that Telenor’s purchases of treasury shares take place on the
Stock Exchange. If the Board wishes to propose to the AGM that the pre-emptive
rights of existing shareholders be waived when undertaking capital expansions,
then such proposals will be based on the common interests of the company and
its shareholders. The reasons for such will be outlined in detail in a working
document submitted to the AGM. Telenor prepares value assessments submitted
by independent third parties when significant transactions take place between
the company and Board members or close relatives/friends, and will introduce
similar guidelines for its shareholders. In accordance with the Group’s
Codes of Conduct, individuals shall, at their own initiative, inform their superiors
of any vested interests or conflicts of interest. Board members must not participate
in discussions or decisions relating to issues which, due to their particular
relevance to them or any of their close relatives/friends, mean that the member
concerned must be considered to have strong vested personal or financial interests
in the matter, or if for other reasons the qualifications of the member concerned
are open to question. The same also applies to the Chief Executive Officer.
Overview
Nomination committee
It is not a legal requirement for the company to have a nomination committee,
but a nomination committee is set up in accordance with resolutions determined
by the AGM. Further stipulations regarding the Nomination Committee are included
in the Articles of Association.
The Nomination Committee consists of four members who are shareholders
or who represent the shareholders. The Chairman of the Corporate Assembly is
a member and chairs the Nomination Committee. Two members are elected by the
AGM and one member is elected by and from the Corporate Assembly’s shareholder-elected
members and alternates. Members are elected for a two-year period.
When appointing members to the Nomination Committee, consideration
is given i.a. to the fact that broad shareholders’ interests should be
represented and to the need for independence in respect of general management
and those who are elected. The CEO or members of the Group Management shall
not be members of the Committee.
The Nomination Committee works in accordance with instructions
that are laid down by the Corporate Assembly’s shareholder-elected members,
in line with proposals from the Board’s shareholder-elected members. The
Nomination Committee proposes candidates to the Corporate Assembly and to the
Board. It also proposes the remuneration to members of these bodies.
The Nomination Committee is responsible for submitting to the
AGM recommendations on the choice of shareholder-elected members and alternates
to the Corporate Assembly, and recommends to the Corporate Assembly the choice
of shareholder-elected Board members. The Nomination Committee forwards these
proposals to the Chairman of the Board.
The Board’s annual self-evaluation report is dealt with
separately by the Nomination Committee.
Telenor will provide information on the company’s website
about who the members of the Committee are, and also information regarding deadlines
for the submission of proposals to the Committee in line with Item 7 of the
Norwegian Recommendations.
Overview
The corporate assembly and board of directors,
composition, independence and remuneration
Pursuant to Norwegian law, Telenor has a Corporate Assembly and a Board
of Directors.
The Corporate Assembly, which is a distinctly Norwegian body,
is primarily a supervisory body which supervises the Board’s management
of company business.
The Corporate Assembly also has decision-making powers in limited,
but important areas. Further stipulations concerning the composition of the
Corporate Assembly and of the Board are laid down by the AGM and included in
the company’s Articles of Association.
The Corporate Assembly has a total of 15 members who are appointed
for a period of two years. The shareholders elect ten of these members, with
alternates, and five are selected from and by the employees. The Board of Directors
has a total of ten members who are elected for a period of two years. Seven
of these members are elected by the shareholders and three are elected from
and by the employees. Telenor’s CEO is not a member of the Board.
The Corporate Assembly and the Board shall be made up to ensure
a broad representation of Telenor’s shareholders. When appointing Telenor’s
Corporate Assembly and Board, emphasis is also placed on meeting Telenor’s
needs for expertise, capacity and balanced decisions. Six of the fifteen members
of the Corporate Assembly and four of the ten Board members are women.
The shareholder-elected members of the Corporate Assembly and
of the Board are independent of the company’s management. The expertise
and capacity of the company’s Board members are highlighted in the Annual
Report and Accounts. Furthermore, the shareholder-elected members a) do not
receive extra remuneration from the company beyond the fees for Corporate Assembly
members and Board members or fees for participation in sub-committees, b) have
not been employed by the company in recent years and c) do not receive fees
that are linked to profit performance or share options in the company. Remunerations
additional to the regular directors’ fees, in the form of fees payable
for sitting on one of the Board’s sub-committees, are specified in the
Annual Report under Note 28 of the consolidated accounts.
Remuneration for members of the Corporate Assembly is determined
by the AGM. Remuneration for Board members who are elected by the Corporate
Assembly is determined by the latter. Remuneration for members of the Nomination
Committee is determined by the shareholder-elected members of the Corporate
Assembly. All remunerations are based on the Corporate Assembly’s, the
Board’s and the Nomination Committee’s responsibilities, expertise,
hours worked and complexity of the work involved.
When electing shareholder-elected members, emphasis is placed
on the relevant candidate not having cross-relations with other members or the
CEO, close family ties to the CEO, or having or representing substantial business
relations with the company. The shareholder-elected members shall, for all material
respects, be independent of the company’s main shareholder.
Should vested interests or associated interest situations arise,
the company’s provisions for vested interests and conflict of interests
shall be applied.
The company does not provide loans to Board members or Group
Management, although Board members and the company’s management are encouraged
to own shares in the company. Details of the number of shares are included in
Note 28 in the Financial Statements.
Overview
The work of the Board of Directors
Pursuant to Norwegian law, the Board is responsible for the management of
the company and the proper organisation of the operation, including a responsibility
to supervise the company’s management. Annually the Board adopts a plan
for its work with special emphasis on objectives, strategy and implementation.
In addition to statutory requirements, the Board works in accordance
with special regulations for the Board, as well as in accordance with guidelines
and procedures for Telenor ASA.
The guidelines and procedures that apply to the Board include
regulations for the preparation of agendas, privacy and confidentiality, competence,
responsibility to establish a management system that ensures that activities
are run in accordance with the company’s core values, ethical guidelines
and generally accepted principles of corporate governance, information on the
use of steering committees and evaluation of the Board’s activity and competence.
In accordance with the said guidelines and procedures, the
Board is responsible, to the degree necessary, for determining strategies, business
plans and budgets for the company. The Board is also responsible for ensuring
that the company has a competent management with clear internal apportionment
of responsibility and work.
The Board has elected a Deputy Chairman who can act when the
Chairman of the Board is unable to or ought not lead the work of the Board.
The Board undertakes annual assessments of its own work and
expertise.
The Board can choose to prepare issues in sub-committees which
have been set up in order to process specific issues. Two such sub-committees
have been set up. These committees do not have any independent decision-making
powers, other than powers specially bestowed on them by the Board.
Telenor’s Remuneration Committee consists of three shareholder-elected
Board members. The Chairman of the Board is also the Chairman of the Committee.
The Vice Chairman of the Board is also a Committee member. The Committee’s
third member shall be elected by the Board’s shareholder-elected members
for a period of two years. The Committee shall meet as required, normally twice
annually. On behalf of the Board, the Committee evaluates the total remuneration
to the CEO and the policy for remuneration to managers. The Remuneration Committee
held two meetings in 2004.
Telenor’s Audit Committee consists of two members from
the Board, one of which has been approved by the Board to meet the requirements
of being a Financial Expert in accordance with US standards. The Audit Committee
normally meet six times per year, for the purpose of identifying, understanding
and evaluating operational and financial risks. This shall include a thorough
evaluation of the company’s financial reporting, internal control of financial
reporting, auditing, and established procedures for advance approval of the
auditor’s remuneration, and also the handling of complaints from the employees
in respect of accounts, control and audits. The Audit Committee held seven meetings
in 2004.
As regards offers for the company, the Board of Telenor will
not, without just cause, seek to prevent or impede any offers made for the company’s
operations or shares. If an offer is submitted for the company’s shares,
the Board will not exercise its issue rights or adopt other measures designed
to prevent the implementation of such offers without such being approved by
the AGM after the offer in question becomes known. Transactions which in reality
involve the sale of the activities will be decided by the AGM, except in such
cases where decisions should, in accordance with the law, be made by the Corporate
Assembly.
The Board shall ensure that the company has good internal controls
in respect of those provisions which apply to the company, including the Group’s
values and Codes of Conduct.
Overview
The Chief Executive Officer
The Chief Executive Officer (CEO) is in charge of the day-to-day management
of operations at Telenor ASA and in the Telenor Group, and is responsible for
ensuring that the company and Group are organised, run and developed in accordance
with the law, Articles of Association and decisions adopted by the Board, the
Corporate Assembly and the AGM.
The Board has devised guidelines and procedures for the CEO,
covering the management of the Telenor Group, the management of ownership interests,
the powers of the CEO, the CEO’s submission of issues to be determined
by the Board and the CEO’s obligation to report to the Board.
Guidelines on the exercise of authority in the Telenor Group
have been drawn up pursuant to the guidelines and procedures for the CEO.
As a part of the day-to-day management and running of the company,
the CEO will be an owner representative in subsidiaries, provided that the issues
in question do not require that they are handled by the Board, Corporate Assembly
or the AGM.
At the election to the boards of Telenor’s subsidiaries,
such election of the board, and its functions, shall be made in accordance with
Telenor’s principles of good corporate governance.
Overview
Group Management
The Group Management consist of heads of key business areas and functions
at Telenor. Issues of important strategic, financial or fundamental matters
to the company are dealt with in the Group Management’s weekly meetings,
including the preparation of items for the Board, the Corporate Assembly and
AGM. This also includes strategy, ongoing follow-up of activities and coordination
between the company’s senior managers etc.
Overview
Control functions
Risk management and internal control are given high priority at Telenor. In
connection with the annual reporting to the SEC (20-F), Telenor’s CEO and
CFO submit a comprehensive personal declaration relating to the quality of financial
reporting, major changes in the company’s internal controls and any irregularities
committed by individuals with a central function in the company’s financial
reporting (SOA Section 302).
Beginning in 2006, the CEO and CFO shall provide an assessment
of the effectiveness of Telenor’s internal controls of its financial reporting
(SOA Section 404). In order to implement the strict US requirements by the deadline
of 31 December 2006, Telenor has implemented a comprehensive high priority project.
The Disclosure Committee supports the company’s efforts
to meet the requirements for financial reporting. The Committee issues guidelines
for reporting, provides follow-up and helps to ensure that requirements are
met. The Committee is chaired by the CFO, and consists of members who have relevant
expertise. The Disclosure Committee meets five times per year in connection
with reviews of the quarterly accounts and the Annual Report, as well as when
required.
The Compliance Officer gives quality assurance that the company
acts in accordance with applicable law, regulations and legally binding directions
issued by public authorities, and that internal conduct in the organisation
does not conflict with Telenor’s own regulations and guidelines. Any breaches
of the Group’s Codes of Conduct should be reported to the Compliance Officer
or manager. The Compliance Officer reports to the CEO.
The Group Auditor helps to ensure good risk management and
provides follow-up of general steering and control functions through random
testing, including ensuring compliance with internal steering directions. The
Group Internal Auditor reports to the CEO and in some cases to the Audit Committee
and the Board.
The Investment Committee shall provide quality assurance of
the company’s investments, including acquisitions and sales of activities.
Investments of a certain size are dealt with by the Investment Committee. The
evaluation of such investments shall subsequently be returned to the Investment
Committee for a final analysis. The Committee, which functions in an advisory
capacity to the CEO and the Group Management, is chaired by the CFO and consists
of members who have relevant expertise. The company has devised a policy for
the investment criteria to be used in the processing of such matters.
In order to ensure overall management and control of the company’s
financial affairs, the company has set up a central finance function, Telenor
Finance. Telenor Finance works in accordance with the guidelines of Telenor’s
Finance Policy, adopted by the Telenor Board, which determines rules relating
to interest and currency risks, the Group’s capital structure, debt structure,
profit liquidity and counter risks, as well as the capital structure and financing
of subsidiaries and financial investments.
Overview
Executive remunerations
Telenor wishes to reward its executives and employees on the basis of performance
which contributes towards the long-term value creation in the Group. Through
working with the Compensation Committee, the Board helps to ensure independence
when formulating total compensation for the company’s chief executives,
including basic salaries, bonuses and commission, share-based incentives, pensions
and other benefits. The Compensation Committee considers the CEO’s total
salary and presents its recommendations to the Board, which in turn determines
the CEO’s salary and other benefits at a meeting. The total salary situation
relating to executives who report directly to the CEO, as well as amendment
proposals before they are implemented, are discussed by the Compensation Committee.
The Compensation Committee is also kept informed about the salary levels of
the managers of the company’s business areas and their management groups,
as well as staff managers who report to other members of the Group Management.
Recommendations relating to policy and schemes which affect the company’s
executive remuneration policy, including bonus programmes and share-based schemes,
etc., are submitted to the Compensation Committee. Work designed to obtain reference
standards in order to map and assess overall compensation practices among the
three upper levels of management were implemented in 2004. The results of this
work will form the basis for formulating future strategy and guidelines for
compensation practices at Telenor.
The frameworks relating to option schemes and share allocation
schemes for employees are approved in advance by the AGM and are followed up
by the Compensation Committee. All aspects relating to remunerations for the
CEO and total remunerations for other managerial employees are shown in the
Annual Report under Note 28 in the Financial Statements.
Overview
Employees
In accordance with Norwegian law, employees’ interests are protected
by the provisions in the Act relating to Public Limited Companies (Norway),
which concern the right to membership of the Board and the Corporate Assembly,
etc. (representatives elected by the employees), and by the provisions in the
Working Environment Act which concern company transfers, wages and working conditions,
dismissal protection, information and talks with employees at an early stage,
etc. These interests are also protected by collective agreements.
Telenor regards skilled employees who enjoy their work to be
an important competitive advantage. Telenor is engaged in activities in markets
which are subject to change, and the company also has to relate to technological
developments in which it is also an active participant. In order for Telenor
to maintain its competitiveness and provide for value creation under such conditions,
the company is subjected to considerable demands in its capacity as an organisation
which is good at making changes. Telenor works actively to ensure that all restructuring
is implemented in a predictable and fair manner. An important aspect of these
processes is to involve the company’s employees in the planning and implementation
process. Good cooperation between managers and employees is important to meet
market demands and expectations.
Telenor places emphasis on developing the expertise of its
employees. As a result of the adopted strategic focus, the company’s efforts
in 2004 have been directed primarily at managers and management development
(TLDP, cf. above under Activities, Strategic Focus and Management Model). Each
year employees respond to an internal value-creation survey (IVS) which comprises
targets and management, human capital, process capital, innovation and simplification.
The IVS process is one of several tools used for achieving Telenor’s ambitions
relating to individual employees and the organisation. By comparing the results
of the annual IVS survey with TLDP, a basis is achieved for the implementation
of improvement measures with respect to employees in general and managers in
particular.
Telenor aims to be a leader with respect to work solutions
and job satisfaction. Employees should enjoy their work. The Fornebu solution
represents an opportunity for employees to participate in value creation through
new work forms in a dynamic environment. The manner in which the Fornebu solution
works for employees has been closely followed up in a number of surveys. Emphasis
has been placed on the question of whether sufficient efforts have been made
to ensure high levels of job-satisfaction and high levels of productivity and
efficiency. Employees are encouraged to suggest improvements to the working
environment also with respect to productivity and efficiency. The results of
the last survey were presented in November 2004, and improvement measures are
being considered and will be implemented during the course of 2005.
Overview
Accounting and reporting
In accordance with Norwegian law, strict accounting and financial reporting
requirements must be met. The Group will conduct its reporting in accordance
with international Financial Reporting Standards (IFRS), effective from the
first quarter of 2005, with corresponding figures from 2004. The Group is thereby
adapting to international accounting principles for its financial reporting.
As a consequence of being listed on Nasdaq, Telenor is subject
to further accounting and financial reporting requirements in accordance with
US regulations. The compilation of quarterly reports, annual reports and 20-F
shall be in accordance with Norwegian standards (up to and including 2004) and
international standards (effective from 2005) and in accordance with US principles
and regulations for accounting. Business Reviews and Financial Reviews are conducted
quarterly.
Business Review is the Group’s internal quarterly results
follow-up, additional to the follow-up of the boards of the business units.
The purpose is the strategic control and follow-up of results based on the prevailing
strategic objectives and value drivers.
Financial Reviews are conducted with each of the Group’s
business areas. The purpose is to analyse the economic and financial situations
in such a way as to form the basis for external reporting and presentations,
and to provide quality assurance of the financial reporting.
Overview
Customers and suppliers
Telenor is committed to the vision “Ideas that simplify”, and
will maintain a strong focus on customers. Telenor believes it is essential
that customers be offered solutions that fulfil their communications requirements
in a simpler and better manner. A good understanding of people’s communications
needs, combined with the ability to deliver as promised, is required to ensure
that Telenor remains the preferred choice. The company takes its reputation
and market surveys seriously, and is engaged in continuous work on improvement
measures.
Telenor is committed to impartial and fair treatment of suppliers.
Suppliers competing for contracts with Telenor should always be confident of
the integrity of Telenor’s selection process. All choices of suppliers
are made in line with the Group’s established guidelines and procedures
for procurement. Telenor has an adopted a principle whereby all procurement
should be subject to competition, regardless of whether or not such competition
relates to the signing of framework agreements or project purchases. As far
as possible, and provided that technical requirements are met, the lowest life
cycle costs (LCC) shall serve as the main criterion for the final choice of
supplier.
Overview
Information and communications
The Board provides guidelines for the company’s reporting of financial
and other information based on openness and transparency, and in accordance
with requirements relating to equal treatment of players in the share market.
Each year, Telenor announces the dates of important events such as the AGM,
the publication of interim reports, open presentations and the payment of any
dividends etc. Information to the company’s shareholders is made available
on Telenor’s website at the same time as it is sent to the shareholders.
Telenor’s Investor Relations function ensures that contact with the company’s
shareholders is maintained outside the AGM. See www.telenor.com/ir/
Overview
Auditor
In accordance with Norwegian and US regulations, Telenor is subject to strict
requirements for auditing, including restrictions on the type of work the auditor
can undertake. Prior approval from the Audit Committee of services carried out
by the auditor is a requirement. The Audit Committee is kept informed, on a
quarterly basis, of all work undertaken by the auditor. Partner rotation is
a further requirement, and the auditor cannot be employed by the company for
a period of one year after having carried out auditing work for the company.
The auditor provides the Board with an annual written confirmation
that he meets a number of requirements, including independence and objectivity.
The company’s auditor presented the main features in a
plan for the execution of the auditing work to the Audit Committee in 2004.
The auditor attends meetings of the Audit Committee and Board meetings that
deal with the Financial Statements. In addition, the auditor attends Board meetings
at least once a year to review the report on the auditor’s view of the
company’s accounting principles, risk areas, internal control routines
etc.
The auditor and the company’s internal audit function
review the company’s internal controls on an annual basis, with the purpose
of identifying weaknesses, and will propose measures to amend such weaknesses.
In accordance with US requirements, the auditor and Audit Committee
hold meetings which are not attended by management. At the AGM, the Board gives
an account of the auditor’s remuneration divided into statutory auditing
work and remuneration linked to other defined work.
Overview
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