Noreco endeavours to exercise a corporate governance policy built on Norwegian corporate law, and that follows the Norwegian Code of Practice for Corporate Governance of 21 October 2010 (hereinafter the ”Code”), However, as of the date of this annual report, Noreco is not in full compliance with the Code.
Noreco is deviating from the Code in the following matters:
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not all members of the Board of Directors (the “Board”), all members of the nomination committee or the auditor will normally attend the general meeting; This is because of the number of board members, and in order to carry out the General Meetings in an efficient manner. It is Noreco’s aim that at least oneof the board members are present at the General Meetings, that one of the members of the nomination committee are present in the event that an election is on the agenda, and that the auditor is present when the General Meetings discusses the annual accounts, or other matters in which the auditor’s presence may be useful.
The Board has the overall responsibility for corporate governance in Noreco and ensures that The Company implements sound corporate governance. The Board has established a remuneration and corporate governance committee consisting of three of the members of the Board. This committee reviews and assesses on a regular basis Noreco’s corporate governance policies and procedures, and recommends any proposed changes to the Board for approval.
The Board has defined Noreco’s basic corporate values, and its ethical guidelines and guidelines for corporate social responsibility are in accordance with these values. Further information on and an English translation of the Code are available on www.ncgb.no.
The Public Limited Liability Companies Act (hereinafter the “PLCA”) and the Securities Trading Act are available in unofficial English translations on www.oslobors.no/ob_eng/OsloBoers/Regulations/Acts
Noreco’s business and main strategy
Noreco has grown from being a small privately owned E&P company into a larger publicly owned independent E&P company listed on Oslo Stock Exchange. From inception, The Company has combined strong commercial principles with a long-term growth perspective. Confidence in Noreco and its businesses is essential for Noreco’s competitiveness and value creation.
In accordance with Noreco’s Articles of Association section 3, “The business of Noreco is exploration, production and sale related to oil and gas activities. Noreco will obtain participating interests in production licences by participating in licence rounds and through acquisition of participating interests”.
Noreco’s vision is to be one of the leading independent energy companies whose activities are focused in the North Sea (Norway, Denmark and United Kingdom). The Company provides value creation for all its shareholders by building an optimised portfolio of exploration, development and production assets.
To achieve its vision, Noreco is actively participating in exploration rounds and acquisition activity, as well as building on core areas were Noreco has the understanding and knowledge to develop unique value creating options for The Company and its shareholders. Further, Noreco endeavours to create values in the core areas through competence and commitment to generate activity and take risk.
Noreco’s employees, and their competence and commitment to succeed, is at the centre of The Company’s strategy. Noreco will ensure that The Company has and maintains competitive competence in all key disciplines, and that it has the necessary capacity to both deliver value creation on Noreco’s assets and sustainable growth in portfolio and capability.
Noreco believes that its integrity and standards are critical to Noreco’s sustainability and value as a company, and that success is both about achieving the right results and delivering in the right way.
Noreco’s business decisions and actions are made in accordance with the following values:
• Being a good corporate citizen
• Caring for Noreco’s people and the environment
• Developing Noreco’s people and competence
• Committing to competitive performance
• Conducting its business with integrity and honesty
Noreco’s ethical guidelines and the guidelines on corporate social responsibility (CSR) are based on the values mentioned above. The CSR statement as approved by the board 14. March 2011 is to be found on Noreco’s website, http://www.noreco.com/en/About-us/Corporate-governance/CSR/
Noreco is aware of the effect our business have on society. The basic principles for corporate social responsibility that The Company will follow, are outlined in our policy for corporate social responsibility.
Equity and dividends
Noreco’s equity is considered to be adequate to Noreco’s objectives, strategies and risk profile. Noreco has not previously paid any dividends, and it does not expect to pay ordinary dividends to its shareholders in the near future. However, the Company aims over time to give shareholders a competitive return oncapital relative to the underlying risk. Any future dividend payment will be subject to determination based on Noreco’s results and other factors the Board finds relevant.
Any proposal by the Board concerning dividends must be approved by Noreco’s shareholders at the General Meeting. Thus, Noreco’s policy concerning dividends is predictable and corresponding with its objectives, strategies and risk profile.
Presently, the General Meeting has not granted the Board with the authority to increase the share capital of Noreco.
Equal treatment of shareholders
Noreco has only one class of shares and each share carries one vote at the general meetings of the company.
Transactions with close associates
In 2011 there have been no significant transactions with closely related parties.
If Noreco should enter into a not immaterial transaction with any of its associated parties within The Company or with companies in which a Director or leading employee of Noreco or close associates of these have a direct or indirect vested interest, those concerned shall immediately notify the Board. Any such transaction must be approved by the CEO and the Board, and where required also as soon as possible publicly disclosed to the market.
If a transaction, which is not immaterial, is entered into between Noreco and shareholders, a shareholder’s parent company, member of the Board, member of the executive management or close associates of such parties, or related companies with minority shareholders, the Board will, where deemed necessary, seek to arrange an independent valuation to be obtained from an independent third party, unless the General Meeting shall consider the matter pursuant to the provisions of the PLCA.
Freely negotiable shares
The Noreco shares are freely negotiable and the Articles of Association do not impose any restriction on the transfer of shares. The Company is listed on the Oslo Stock Exchange.
General Meetings
The General Meeting is Noreco’s supreme corporate body. The Board strives to ensure that the General Meeting is an effective forum for communication between the Board and the shareholders.
Therefore, Noreco encourages all shareholders to exercise their right to participate in the general meetings.
The Annual General Meeting will normally be held in April or May each year.
The calling notice will be distributed to all shareholders no later than 21 days before a general meeting, cf. Noreco’s Articles of Association section 10.
Noreco endeavours in general to make the detailed support information, the resolutions to be considered at the General Meeting and the nomination committee’s recommendations and report, available on the Company’s website no later than 21 days prior to a general meeting. The resolutions and the supporting information distributed are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting.
The calling notice includes a reference to Noreco’s website where the notice calling the meeting and other supporting documents are made available. As the supporting documents are made accessible for the shareholders on Noreco’s web-pages, the documents will normally not be enclosed in the calling notice sent to the shareholders, cf. Noreco’s Articles of Association section 13. Further, the right for shareholders to propose resolutions in respect of matters to be dealt with by the general meeting will be described on the website.
As the right for shareholders to propose resolutions is described on Noreco’s website, it is not specifically included in the calling notice. According to Noreco’s Articles of Association section 9, shareholders must give written notice to Noreco of their intention to attend the General Meeting by the date stated in the calling notice, which date must be at least two working days before the General Meeting. Shareholders, who are unable to be present, are encouraged to participate by proxy, and a person who will be available to vote on behalf of shareholders as their proxy will be nominated. Such proxy which allows separate voting instructions to be given for each matter to be considered by the meeting and for each of the candidates nominated for election is enclosed in the calling notice. To the extent necessary, members of the Board the Nomination Committee and the auditor will strive to be present at the General Meeting.
Noreco will endeavour to arrange elections in such manners that the general meeting may vote separately for each candidate nominated for election to the the Company’s corporate bodies.
The Board decides the agenda for the General Meeting. However, the main agenda items are determined by the requirements of the PLCA and requirements in Noreco’s Articles of Association.
The Board may decide to allow electronic participation in general meetings, and will consider this before each general meeting. The chairman of the Board shall chair the General Meeting, if not the Board has decided to appoint an independent chairperson.
Nomination committee
The Nomination Committee consists of three members elected by the General Meeting. Chairman of the nomination committee Ole Rettedal is the CEO of IKM Industri-Invest AS, who owns nine percent of the shares in Noreco. Eimund Nygaard is a member of the board, and Aasulv Tveitereid is independent of the board and management. The service shall be two years unless the General Meeting determines that the service period shall be shorter, cf. Noreco’s Articles of Association section 7.
The Articles of Association states that: “the Nomination Committee shall prepare a motion for the Annual General Meeting relating to:
- Election of members of the Board and the chairperson of the Board.
- Election of the members of the Nomination Committee and the chairperson of the Committee
- The remuneration of the Directors and the members of the Nomination Committee.
- Any amendments of the Nomination Committee’s Mandate and Charter”.
The tasks of the Nomination Committee are further described in Noreco’s Nomination Committee guidelines. The committee had 12 meetings in 2011. Board candidates are selected considering the competence, experience, capacity and diversity of each individual and the Group as a whole. Its recommendations will normally be explained. The nomination committee also proposes the remuneration of the directors to the General Meeting, reflecting the responsibility, competence, time and complexity of the work involved.
The remuneration shall be a fixed amount, which does not depend on results or involve options. The General Meeting makes the final decision as to the remuneration.
Information regarding deadlines for proposals for members of the Board and the Nomination Committee will be posted on Noreco’s website.
Corporate assembly
Noreco does not have a corporate assembly as it is not required to.
Risk management and internal control
The Noreco management system covers all areas of operation of the Company. The system is divided into four levels and is described in the Noreco Management Manual.
Level 1 describes Noreco’s vision and values, level 2 is the management documents and level 3 general requirements in work processes flow diagrams and procedures and 4 contains supporting documentation (e.g. guidelines).
Management documents for risk management, internal control and financial reporting are covered in level 2 in the management system. Noreco’s risk management process covers all types of risks, opportunities and threats. The financial manual describes how financial management and reporting is performed in Noreco.
The Board carries out an annual review of Noreco’s main areas of business and its internal control system. Noreco’s management conduct day-to-day follow-up of financial management and reporting.
The Board’s audit committee assesses the integrity of Noreco’s accounts, and prepares for the board items related to financial review and control and external audit of accounts.
Non-conformances are systematically followed up and corrective measures initiated. The internal control systems encompass Noreco’s corporate values, ethical guidelines and guidelines for corporate social responsibility.
Information and communications
Noreco will on a regular basis keep shareholders and investors informed about commercial and financial development and performance. Such information will also be made available on the Company’s website simultaneously with the informing of shareholders. Noreco is committed to ensuring that the participants in the stock market receive the same information at the same time.
Hence, key value drivers and risks will be disclosed through Thompson Reuters on www.newsweb.no as soon as it becomes known to the Board and the executive management. There are special rules related to publishing of drilling results.
The annual financial report is distributed to the shareholders before the General Meeting. Quarterly earnings releases are published within two months following the end of the quarter. Presentations of the Quarterly earnings are communicated directly via the internet. Noreco publishes an annual financial calendar which can be consulted on the Oslo Stock Exchange web site, through news agencies and on the the Company`s website.
The Board performs the financial and other reporting and their contact with shareholders outside the General Meeting with basis in the requirement for openness and equal treatment for all participants in the market, and in line with its internal guidelines for Noreco’s contact with shareholders other than through general meetings.
Noreco strives to ensure that the information provided in announcements to the market, reports, presentations and meetings at all times will give the correct picture of the Company’s current position in all relevant matters.
Take-Overs
Noreco’s Articles of Association do not contain any restrictions, limitations or defence mechanisms on acquiring Noreco’s shares.
In accordance with the Securities Trading Act and the Code, the Board has prepared internal guidelines for the event of a take-over bid.
In the event of a take-over bid, the Board will, in accordance with its overall responsibility for corporate governance, act for the benefit of all shareholders. The Board will not seek to hinder or obstruct takeover bids for Noreco’s activities or shares unless there are particular reasons for this.
If an offer is made for the shares of Noreco, the Board will make a recommendation on whether the shareholders should or should not accept the offer.
The Board should arrange a valuation from an independent expert which includes an explanation, and this statement should be made public no later than at the time of the public disclosure of the Board’s statement.
Auditor
Year-end accounts are audited. The audit committee receives a report from the auditor after year-end audits for the year concerned, and the auditor presents to the audit committee a review of Noreco’s internal control procedures.
Annually, the auditor presents to the Board a review of Noreco’s internal control procedures. The auditor participates in the meetings of the Board that deal with annual accounts. The Board regularly reviews the relationship to ensure that the auditor is fulfilling an independent and satisfactory control function. The Board reports the remuneration of the auditor at the General Meeting for the approval of the shareholders.
The Board strives to meet with the auditor at least once a year at which neither the chief executive officer nor any other member of the executive management present.
The Board has established guidelines in respect of the use of the auditor by Noreco’s executive management for services other than the audit.