Governance in Telenor
Content overview:
- Good Corporate Governance, Ethics and Social responsibility
- Owners' interests - Annual General Meeting (AGM)
- Activities, strategic focus areas and management model
- Company capital and dividends
- Transferral rights, equal treatment of shareholders and transactions with close relatives/friends
- Nomination committee
- The corporate assembly and board of directors, composition, independence and remuneration
- The work of the Board of Directors
- The Chief Executive Officer
- Group Executive Management
- Control functions
- Executive compensation
- Employees
- Accounting and reporting
- Customers and suppliers
- Information and communication
- External Auditor
Good Corporate Governance, Ethics and Social responsibility
Telenor considers good corporate governance to be a necessary requirement for value creation and trustworthiness, and for access to capital. In this context good corporate governance means open interaction and cooperation among the company's owners, the Corporate Assembly, the Board and Group Executive 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 (SOX), 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 Executive Management is responsible for ensuring the existence of internal rules, procedures and structures which can efficiently secure value creation, and where i.e. 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 ensures 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 has a common vision and a written set of values to share for the whole organisation thereby enabling uniting and delivering the foundation for our enterprise around the world.
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. The Codes of Conduct have been implemented within the Telenor Group's Norwegian and other international companies in which Telenor has operational control.
On the basis of the company's values and Codes of Conduct, Telenor's Ethical Council will seek to promote ethical awareness within the Group. The Ethical Council can bring up for discussion matters relating to ethics and reputation. The Council has no decisionmaking authority, but may make recommendations to the CEO. The Council is chaired by the Chief Executive Officer and is otherwise composed of the Group Executive Management, as well as employee representatives and relevant staff functions. The Compliance Officer acts as secretary and is in charge of preparing matters for consideration.
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. Specific tools relating to these issues have been prepared on the corporate level.
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/cr
Telenor continues the work to ensure that policies, procedures, training and control mechanisms are current and adequate, and that they meet both Telenor's own requirements as well as the justified expectations of other interested parties. During 2006, Telenor's internal rules were adapted to new US requirements placing greater focus on internal controls relating to financial reporting.
Telenor has developed a set of a set of principal documents, e.g. the Codes of Conduct as well as policies and their subordinated complimentary procedures, to ensure good and efficient Corporate Level Controls. Internal rules are adapted and implemented at international subsidiaries in which Telenor has operational control.
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 have featured prominently in Telenor's work on social responsibility.
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 activitiesThe Ministry of Trade and Industry's ownership management shall be based on principles relating to good ownership), 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.
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 (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 selected 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 ensure and maintain a strong position in the Nordic region. 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. This overall effort is further steps towards making Telenor a more simplified and more customer-oriented company. The importance of this work was emphasised through the assignment of a responsibility for developing and ensuring the results of these efforts to one of the members of the Group Executive Management. Valuedriven 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 leadership expectations.
Telenor's leadership expectations constitute a framework relating to how the company's style of management should be developed and how individual managers should develop within Telenor. These leadership expectations thus define the framework for management at Telenor, and also take into account the different markets and cultures in which the Group conducts business.
These leadership expectations are incorporated into and reviewed by all the management groups at the international companies of which Telenor has operational control. In addition to general leadership expectations, Telenor continuously runs an integrated process designed to evaluate, develop and reward managers in accordance with Telenor's own leadership demands and business results; Telenor Development Process (TDP). The TDP process aim to set direction, manage performance and develop individual, team and organisational capabilities to deliver business results. Under this process, critical positions are identified, along with the requirements to fill such positions. Talents and potential sucessors are also identified, as are candidates for future management positions. TDP also provides details relating to career objectives for managers, and also reflects information relating to diversity e.g. gender and nationality.
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 and organisational development, 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.
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 must be seen in this context. In 2006 the AGM authorised the Board to repurchase shares for a period of one year, i.e. until the AGM in May 2007. Telenor shares should be seen as liquid and interesting investment opportunities. Based on Telenor's financial position and anticipated capital requirements, the Board accounted for an amendment to dividends policy at the AGM in 2005. 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.
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 purchase of treasury shares takes 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 shareholders, Board members or close relatives/friends. In accordance with the Group's Codes of Conduct, individuals shall, at their own initiatve, 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.
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.e. to the fact that broad shareholders' interests should be represented and to the need for independence with respect to general management and those who are elected. The CEO or members of the Group Executive Management shall not be members of the Committee.
The Nomination Committee works in accordance with instructions that are set forth 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 also provides substantiated recommendations to the Corporate Assembly on the choice of shareholder-elected Board members. The Board's annual self-evaluation report is dealt with separately by the Nomination Committee.
On the company's website, Telenor provides information about who the members of the Committee are, as well as information regarding deadlines for the submission of proposals to the Committee.
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. Seven 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 subcommittees, 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 disclosed in the Annual Report under Note 30 in the annual report from Telenor.
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 Executive 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 30 in the annual report from Telenor.
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, as well as ensure that the company has adequate systems for good internal controls. 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 to 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 Compensation Committee consists of three shareholder-elected Board members. The chairman of the Board is also the Chairman of the committee. The Committee shall meet as required, normally four to five times annually. On behalf of the Board, the Committee evaluates the total remuneration to the CEO and the policy for remuneration to managers.
Telenor’s Audit Committee consists of three 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 seven to eight 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 approval of the auditor’s remuneration, and also the handling of complaints from the employees in respect of accounts, control and audits.
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.
Telenor’s Audit Committee consists of three 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 seven to eight 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 approval of the auditor’s remuneration, and also the handling of complaints from the employees in respect of accounts, control and audits.
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.
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.
Group Executive Management
The Group Executive Management consists 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 Executive Management’s meetings, including the preparation of items for the Board, the Corporate Assembly and AGM. This also includes strategy, ongoing followup of activities and coordination between the company’s senior managers etc.
Control functions
Risk management and internal control are given high priority at Telenor. In connection with the annual reporting, 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 key position function in the company’s financial reporting. The CEO and CFO shall also provide an assessment of the effectiveness of Telenor’s internal controls of its financial reporting.
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 normally meets 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 an individual’s immediate superior or the Compliance Officer. The Compliance Officer reports directly to the CEO and in som cases to the Audit Committee and the Board.
Group Internal Audit 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 Head of Group Internal Audit reports directly 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 Committee, which functions in an advisory capacity to the CEO and Group Executive Management, is chaired by the CFO and consists of members who have relevant expertise. The company’s Group Policy Investment shall 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, Group Treasury. Group Treasury functions in accordance with the mandate of the Group Policy Treasury approved by the Telenor Board, providing the requirements sought relating to interest and currency risks, the Group’s capital structure, debt structure, liquidity and counter risks, as well as the capital structure and financing of subsidiaries and financial investments.
Executive compensation
Compensation shall be used to reward performance and to influence and reinforce Telenor’s desired culture and values and Telenor shall seek to offer a total compensation package that is attractive, fair and competitive.
The overall remuneration for the Group Executive Management reflects the accountabilities and impact of role and role holder, breadth and complexity of the operations, the value- and performance based culture as well as the need to attract and retain key executives.
Considerations on the overall remuneration level and composition of the package reflect the national and international framework and business environment the company operates within.
The arrangements are transparent and in line with good corporate governance.
The total remuneration package for the Group Executive Management, eight people including the CEO, consists of the following main elements; Base Salary (main element); Annual Bonus; Share program; Pension- and Insurance arrangements; Severance Pay and Other Benefits.
The Base Salary is mainy determined on the basis of the role, relevant market and performance. Assessment of performance is based on the overall contribution, including delivery of targets agreed up front, as well as how the individual lives the company values, ethics and corporate governance. The Base Salary is annually reviewed.
The Annual Bonus is based on achievement of Group-, Business Area and individual targets, with ambitious performance levels set up front, The payment for achievement of expected performance level is 25% of Base Salary (three months) for Group Executive Management. Maximum potential for exceeding performance is the double. The bonus payments are subject to vacation pay, but not included in the pensionable salary.
Currently the company operates a tree year share option plan, decided in December 2005 for the period 2006 – 2008. In order to follow up on changes in the framework put forward December 2006 by the Norwegian Government, the Telenor ASA Board of Directors has decided to discontinue the program and considers establishing an alternative incentive.
The company’s general Share Savings Plan for employees in defined companies is also applicable to the Group Executive Management. According to the plan the employee may buy shares with a discount. The shares used in the plan are brought in the market upon authorisation of the General Assembly.
Through the Compensation Committee, the Board helps to ensure independence when formulating total compensation for the company’s Group Executive Management. 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 remuneration package relating to executives who report directly to the CEO, as well as amendment proposals are discussed in 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 Executive Management.
The guidelines for settling the Group Executive Management Remuneration for the coming accounting year will be presented to the General Assembly for their recommendation in the 2007 Annual Meeting. All aspects relating to remunerations for the CEO and total remunerations for other managerial employees are shown in the Annual Report under Note 30 in the Financial Statements.
Employees
In accordance with Norwegian law, employee’s 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. Each year employees respond to an Internal Value- Creation (IVC) which comprises targets and management, human capital, process capital, innovation and simplification. The IVC 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 IVC survey with TDP, 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 jobsatisfaction and high levels of productivity and efficiency. Employees are encouraged to suggest improvements to the working environment also with respect to productivity and efficiency.
Accounting and reporting
In accordance with Norwegian law, strict accounting and financial reporting requirements must be met. The Group conducts its reporting in accordance with international Financial Reporting Standards (IFRS). 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 and international standards and in accordance with US principles and regulations for accounting.
Business Reviews and Financial Reviews are conducted quarterly.
Business Review are conducted with each of the Group’s business areas. The purpose is the strategic control and follow-up of results based on the prevailing strategic objectives and value drivers.
Financial Reviews is the Group’s internal quarterly results follow-up, additional to the follow-up of the boards of the business units.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.
Customers and suppliers
Telenor furthers its ongoing efforts to strengthen the group’s customer orientation. 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. The Group Policy Procurement and supplementary procedures are established to ensure that suppliers competing for contracts with Telenor always should be confident of the integrity of Telenor’s selection process. Telenor has 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.
Information and communication
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
External Auditor
In accordance with Norwegian and US regulations, Telenor is subject to strict requirements for auditing, including restrictions on the type of work the external auditor can undertake. Prior approval from the Audit Committee of services carried out by the external auditor is a US requirement. The Audit Committee is kept informed, on a quarterly basis, of all work undertaken by the external auditor. Partner rotation is a further requirement, and the external auditor cannot be employed by the company for a period of one year after having carried out auditing work for the company.
The external auditor provides the Board with an annual written confirmation that he meets a number of requirements, including independence and objectivity.
The company’s external auditor presents the main features in a plan for the execution of the auditing work to the Audit Committee and reports interim and final status of his work on a regular basis. The external auditor attends all meetings of the Audit Committee and Board meeting that deal with the annual Financial Statements or otherwise on request.
The external auditor and the Group Internal Audit function reviews the company’s internal controls on an annual basis, with the purpose of identifying weaknesses proposing measures for remediation and to amend such weaknesses.
In accordance with US requirements, the external auditor and Audit Committee hold meetings which are not attended by the CEO or members of Group Executive 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 as disclosed in the annual financial statements.
