Corporate governance
Management Relations and Corporate Governance
Being a listed company, the Company must establish procedures to ensure that the Board has a fair basis for making appropriate estimates concerning the Group’s financial situation and its future prospects. In managing, supervising and reporting concerning the Group’s financial situation and its operating profits, the Board adheres to the reports described below:
- A strategy plan
- A budget and a prognosis for the coming year
- An ongoing follow-up on budgets and a revision of prognoses
- A monthly report/a quarterly report
Ongoing management reporting includes:
- Monthly financial results and a statement of financial standing
- Comparison of budgeted and actual results on a monthly, a quarterly and an annual basis
- Quarterly reports concerning financial results and the financial situation
- Summary of important result indicators or events at each board meeting
- Reviewing contracts and co-operation agreements with a view to ensuring that all undertakings and obligations are included
- Reviewing the operating results of the vessels
- Liquidity prognosis and ready capital.
- Reviewing currency and interest risks
The Company has arranged its internal accounting control with a view to ensuring perfection and accuracy in the Company’s account books and a detailed internal control concerning buying and selling of the Company’s shares. It is the opinion of the Board that the above control ensures efficient procedures for presentation of accounts.
Audit Committee
The Board has formed a permanent audit committee which, together with the Executive Management in the dialogue with the accountant and the finance institutes, monitors that internal controls, risk management and the audit is conducted as agreed.
- the financial reporting process
- Company’s internal control systems
- the statutory audit of financial statements
- auditor’s independence
The audit committee holds a minimum of 9 meetings annually.
Corporate Governance
The Company aims to comply with high standards within Corporate Governance, and the Board of Directors of the Company will on an ongoing basis adapt to the framework and the principles for the general management of the Group. The aim is to ensure that the Group is managed in such a way that the Group can reach the goal of ensuring a long term accrued value for its shareholders.
In preparing the annual report, the Board has reviewed the recommendations for corporate governance published by the Copenhagen Stock Exchange Committee on Corporate Governance in August, 2005, and revised on 6 February, 2008, 10 December, 2008 and by 9 April 2010. The Company complies with the majority of the Committee’s recommendations but do not follow the recommendations in the below areas:
- Three out of five members of the Board own shares of vessels partly owned or operated by the Group and thus do not fully comply with the recommendation that a minimum of 50% of the board must be independent. The Board of Directors considers it to be an advantage that they share the interest of the investors concerning the operation of the vessels.
- Presently, the Company sees no need for age limits for board members as the Company emphasises that the Board of Directors includes members with an important, relevant business experience and due to the fact that Board members are elected for one year at the time only.
- There is no limit to the length of time a board member may be part of the Board. All Board members are up for re-election every year and the Company therefore finds it irrelevant to establish time limits.
- Due to the relatively simple structure of the Group and the limited number of employees the board finds it unnecessary to establish a nomination committee and remuneration committee. At the beginning of 2008, an audit committee was introduced according to the 2009 requirements, replacing the existing audit committee that was made up of the Board of Directors.
- Due to the employees direct and informal access to both management and Board of Directors, the Company has chosen not to have a "whistleblower"system.
- As a consequence of the Group’s structure and the limited number of employees, it is the opinion of the management that the question of staff-elected Board members is not relevant.
- The Board of Directors has not established an actual remuneration policy but has and will on an ongoing basis assess the fees for Board and Executive Management in relation to their tasks and responsibilities.
Shareholders and other stakeholders
The Company’s Board and Management want and actively work towards maintaining a good communication and dialogue with shareholders and other stakeholders. The Company aims at establishing a high degree of openness in its communication of information concerning the Group’s financial development and its activities. Information to and the dialogue with shareholders and other stakeholders will be effected via the Company’s homepage, publication to the stock exchange OMX and via meetings with investors, analysts and media. There will be access to information on the Company’s web-site immediately after publications on OMX the Nordic Exchange Copenhagen. Further to this, presentations will be published via the Company’s web-page.
Annual reports and articles of association are available in Danish or English. The Company’s financial and profits policy is assessed on an ongoing basis.
The Board of Directors
The tasks of the Board are to a wide extent defined by Danish law. This means that the Board of Directors handles the general management of the Group and decides about targets and strategies. Furthermore, the Board manages the overall surveillance of the Company and its subsidiaries and K/S - structures and controls that they are managed in a proper way and in accordance with the legislation and the articles of association of the individual companies. The tasks of the Board are established in a procedure that is, at least once a year, reconsidered and adapted to the needs of the Group.
The Board shall be deemed to have the necessary qualifications for professional background and experience in international business, shipping, finance, law, communication and management. Board composition ensures dissemination of relevant skills, so that the Board can perform its managerial and strategic tasks and ensure a controlled growth of the Group in a constructive cooperation with the Executive Board. Once a year an evaluation of the Board's work is carried out.
According to the Company's Articles of Association the general assembly elects between three and seven members to the Board. The Board currently consists of five elected members, elected for one year, renewable. The Board shall elect a chairman and a vice chairman. New members' profiles submitted to the General Assembly and the newly elected will receive a thorough introduction to the Company.
The daily management normally participates in board meetings to be held at least 5 times a year. The Board is regularly briefed on the Group's circumstances, including a monthly report.
There is no duality between the Board of Directors and management, and none of the Board members involved in the daily management of the Group.
Board members receive a fixed annual fee, as approved by the shareholders in approving the annual report. The board is not covered by bonus or share option schemes. None of the board members are entitled to special consideration in connection with resignation.
Executive Management
The executive management is appointed by the Board of Directors, which sets conditions of employment. Management is responsible for the daily operations of the Group in compliance with the guidelines and directives as the Board specifies.
The remuneration of executive management, consisting of two members shall be settled by the Board. Such substantial changes in company ownership, the executive management has the right to receive special remuneration.
Incentive schemes for directors and senior staff includes a stock option plan from 2006, 2007 and 2008 and the usual bonus program. Principles of stock option presented to the General Assembly for approval.
Risk Management
One of the Board's control tasks is to ensure that there is an effective risk management, including that significant risks are identified and that procedures exist for assessing risk management. In this context, the Group has focused on capital resources, liquidity, currency, interest rate and loan agreements so that the Group complies with the then current covenants in its loan agreements.
The management remains updated on developments in the markets where the Group operates. This ia done by having close contact with the Group's business partners and by utilizing an extensive network of contacts to shipping analysts, etc.
In connection with approval of the annual report the Board of Directors evaluates the Group's risk management policies as they are adopted. In this regard, the Board of Directors has decided that the Group's accounts must be made in DKK. See also separate note xyz regarding risk management.
Audit and internal control
The Company’s external auditor is elected by the general assembly for one year at a time. To safeguard its shareholders and the public’s interest, it was recommended at the annual general meeting to follow the Board’s recommendation and choose a chartered accountancy firm. The auditors report to the full Board at least once a year and additionally after the detection of possible issues that the Board should be involved in. The auditor participates in the Board meetings related to the presentation of the annual report to the Board.
The framework of the auditor’s work, including his remuneration, audit services as well as non-audit services, is described in the audit protocol and letters of agreement.
At a meeting with the external auditor, the Board reviews the annual report, and the auditor’s observations as well as discussing essential issues revealed in connection with the auditing. Furthermore, the adopted accounting policies are discussed as well as their consequences for the audit.
Once a year as a minimum, the Board assesses the internal control systems with a view to ensuring that these are appropriate and sufficient and comply with good practice within the area.
The Company’s monitoring of the audit has been referred to an audit committee.
Based on the recommendations issued by The Committee on Corporate Governance in Denmark for good corporate governance, Erria A/S has wanted to make a thorough individual review in comment form, of every single recommendation. This can be read in its entirety on www.erria.dk under “Investor Relations” in the point “Corporate Governance”, where the full explanation can be downloaded at the bottom of the page.
Financial Reporting Process
The Board and Executive Management have the overall responsibility for the Group’s control and risk management of the financial reporting process, including compliance with relevant legislation and other regulations relating to financial reporting. The Group’s control and risk management systems can create a reasonable, but not absolute, assurance that the wrongful use of assets, liabilities and/or significant errors and deficiencies in financial reporting is avoided.
Control Environment
At least once a year, the Board assesses the Group’s organisational structure, the risk of fraud, and the existence of internal rules and guidelines.
The Board and Executive Management determine and approve general policies, procedures and controls in key areas relating to the financial reporting process.
Risk Assessment
At least once a year the Board carries out a comprehensive assessment of the risks associated with the financial reporting process. As part of the risk assessment, the Board takes into consideration the likelihood of fraud, and the measures that need to be taken in order to reduce or eliminate such risks. In this context, Management discusses any possible incentive or motivation for account manipulation or other fraud.
Credit risk
In the opinion of the management there are no material credit risks in the balance sheet.
Other risks
The Company has an important engagement in Vietnam through a joint ownership in Saigon Shipping J/S Company (34%), where the main shareholder is controlled by the Peoples Committee (51%). Political stability and relatively favourable financial conditions for foreign investments, are the reasons for the growth that is characteristic of the present development in Vietnam. A development for which there are no signs of weakening. The Company does not consider itself to be exposed to extraordinary political risks in connection with the engagement in Vietnam, and expects a considerable progress in the business foundation and lead, which has been achieved in shipping and logistics.
Intellectual capital resources
The Company’s most important resources are its well educated employees in the offices in Denmark and in the subsidiaries abroad, as well as the seamen onboard the vessels.
It is the ambition of the Company to be on the leading edge of developments in sea transport and logistics. The critical business processes are quality, service and tailor-made service concepts. In order to ensure that customers get the agreed services, all methods and procedures must be individually documented.
There is constant focus on optimising business procedures and improving our performance. This focus gives the Company better competitiveness and has been reflected concretely in more than a doubling of approvals with leading oil companies within the last 2 years.
Another important focus area is our environmental performance. It is the Company’s position that we all have a responsibility to contribute towards a better environment. Therefore, the Company has also chosen to become environmentally certified according to ISO standards. Commercially, everything seems to indicate that environmental certification will provide benefits, as more customers have preferences for companies that focus on the environment.
In order to be able to continually supply and develop competitive products and services, the Company will continue to recruit and retain employees with a high level of education.
Social Responsibility
The Company takes responsibility for safety and the physical and working environment, and therefore continually works towards social and environmental sustainability. As a consequence, the Company’s maintenance program is designed so that it contributes, as far as possible, to the vessels’ possible negative influence on the environment, including CO2 emissions, being limited as much as possible.
At the end of 2009, the Company chose to ask an external company to carry out an assessment of the physical working environment. The result, which has been reviewed by the organization, shows a picture of employees generally having assessed the quality of the current working environment as being significantly high compared with other Danish workplaces.
The Company wishes to attract motivated and skilled employees, also on its vessels. Therefore, there is continual work being done to make it attractive to work on the Group’s vessels, by offering modern and orderly conditions onboard and by paying employees a salary at the going rate for qualified sailors.
Download Corporate Governance Redegørelse (Danish version)
2009 Corporate Governance årsrapport
