On an annual basis, the Board of Directors performs a review of the items, and the section below describes DNO’s compliance of the NUES’ principles of Corporate Governance in detail. The review is based on the latest version of the Code which was issued in October 2010.
1. Implementation and reporting on Corporate Governance
DNO has drawn up a special policy on corporate governance, and the Board has decided to comply with the Norwegian Code of Practice. As DNO shares are listed on the Oslo Stock Exchange (OSE), the Company is subject to Norwegian securities legislation and stock exchange regulations. The Company aims to comply with all requirements related to the stock listing, and in addition DNO’s goal is to meet the expectations of the international capital market.
As a foundation for good corporate governance is DNO’s value platform and the principles for code of conduct. These outline the corporate standard of ethics and other core values. The DNO code of conduct is a guideline to all employees on how to represent the Company in a prudent and ethical manner.
Further on, the Company’s attitude towards corporate responsibility has been defined in detail in the corporate responsibility policy, and is anchored in our ethical guidelines. DNO is committed to promote sustainable social development by operating in compliance with responsible business principles, carrying out systematic improvement work relating to the external environment, climate and energy and by investing in profitable business projects that can generate positive effects for the society. DNO seeks to align to international standards – such as the UN Global Compact – in its approach towards corporate responsibility.
2. Business
DNO International ASA is an independent international upstream oil and gas company.
The articles of association and the Norwegian Public Limited Liability Companies Act form the legal corporate framework for DNO’s business operations. The articles of association (can be found on www.dno.no) describes the objectives of the Company’s activities, along with provisions for the annual general meeting (AGM), the Board of Directors and the corporate assembly. The Company’s goals and visions are anchored in a strategy document, which is updated on a timely basis. Through quarterly presentations and other market presentations, DNO is reporting status on the business activities.
3. Equity and dividends
Shareholder’s equity
One of DNO’s objectives is to maintain a strong credit rating and to ensure healthy capital ratios. DNO monitors capital on the basis of its book equity ratio, and has a policy that this ratio should be 30% or higher.
Dividend policy
A review is made annually to assess whether payment of dividend should be proposed. The review takes into consideration both planned capital expenditures and cash flows for future periods.
Capital increase
The Board of Directors has been authorized by the AGM to increase the Company’s share capital by up to NOK 20 million by issuing up to 80,000,000 shares with a face value of NOK 0.25, at a price and other subscription terms to be stipulated by the Board. The authorization also covers a capital increase against contributions in kind, including in connection with mergers, and is valid for two years from the date of the AGM.
Purchase of own shares
The Board of Directors has been authorized by the AGM to buy treasury shares within the framework of the Public Limited Companies Act. Purchases and sales of treasury shares are made when the Board of Directors regards the transaction as favorable for the shareholders.
4. Equal treatment of shareholders and transactions with close associates
DNO has one class of shares and each share gives one vote at the AGM. The articles of association contain no restrictions regarding the right to vote.
The repurchase of treasury shares is made through the Oslo Stock Exchange.
Transactions with close associates
Close associates are defined as all parties that have the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also close associates if they are subject to common control or common significant influence. All transactions between close associates are based on the principle of ‘arms length’, which are estimated market prices.
For more information about close associates, please refer to the the annual consolidated financial statements.
5. Freely negotiable shares
DNO’s shares are listed on the Oslo Stock Exchange and are freely negotiable. The articles of association does not contain any restrictions on the negotiability.
6. General Meetings
The annual general meeting (AGM) is the Company’s highest authority. DNO’s articles of association and the Norwegian Public Limited Liability Companies Act stipulate the role and mandate of the AGM.
The AGM is to be held by the end of June each year. For the last few years, DNO’s AGM has been held in the middle of June. The minutes of general meetings are available on the Company’s website; www.dno.no.
The AGM shall be convened by written notification to all shareholders with a known address. The Notice shall be sent no later than 21 days before the meeting is to be held. The right to attend and vote at the general meeting may only be exercised if the acquisition has been entered in the register of shareholders on the fifth working day before the general meeting (the registration date). When documents relating to issues that are to be dealt with at the annual general meeting have been made available to the shareholders on the Company’s website, then the law’s requirement that the documents are to be sent to the shareholders does not apply. This also applies to documents that according to the law are to be included in or attached to the notice convening the meeting. A shareholder may nonetheless demand to be sent documents that relate to issues that are to be dealt with at the general meeting.
In accordance with Norwegian law, an auditor or a shareholder representing at least 5% of the share capital may request an extraordinary general meeting (EGM) to discuss a particular matter. The Board must ensure that the meeting is held within one month of the request being submitted.
Beyond this, only the Board of Directors has a mandate to call an EGM.
7. Nomination committee
The Company continuously evaluates whether a nomination committee should be established. At this stage, it has been concluded that such a committee is not needed, mainly based on the size of the Company.
8. Corporate assembly and Board of Directors; composition and independence
According to current Norwegian legislation, DNO is not required to elect a corporate assembly.
As stated in the Company’s articles of association, the Board of Directors shall have three to five members. All members of the Board, including the Chairman, are elected by the annual general meeting. Currently, the Board consists of five members who have wide competence and experience from both the oil industry as well as broad experience within finance. Three of the five board members are female. The board members’ backgrounds and an overview of their shareholdings are described in the annual report and on the Company’s web site.
9. The work of the Board of Directors
The Board members are elected for two years. The role of the Board of Directors is to supervise the management and the Company’s strategic development, and to ensure that the long-term interests of all the shareholders and other stakeholders are being served.
The Board has approved rules of procedures, including its responsibilities and which matters are to be discussed at the Board level. The Board prepares an annual plan for its work, and performs an annual review of its own work. The Board has also established work instructions for the Chief Executive Officer.
The Board of Directors normally meets 8-12 times per year. Additional meetings are held when required. The meetings may be undertaken via telephone or video conference. The rules of procedures for the Board outlines a number of topics that should be on the agenda in the regular meetings.
The Board has nominated an audit committee consisting of two non-executive directors with financial expertise. There is a mandate for the audit committee which describes its responsibilities for the quality control of the Company’s financial reporting. The committee will also monitor the internal control arrangements and the risk evaluation systems. The audit committee meets with the external auditor at least once a year.
DNO’s remuneration committee is nominated by the Board and consists of two board members. The committee considers questions related to the compensation to the Chief Executive Officer and key management and prepares and presents this to the Board. The work of the committee is described in a mandate approved by the Board.
10. Risk Management and Internal Control
Risk management in DNO is based on the principle that risk management is an integral part of all business activities and is a continuous process. Every senior manager in DNO is responsible for monitoring and managing risk within their business area, and an evaluation of business risk shall be carried out prior to any major decision in the Company.
The Company has formalized a risk management policy with identification and assessment of risks, including risk rating and mitigation, corrective measures and establishment of barriers. There is a centralized function in DNO with responsibility of analyzing and evaluating the Group’s total risk exposure. This function is also responsible for facilitating and streamlining the processes across business units, in order to have unified and standardized approach to the risk subject.
Reporting and reviewing is done on a regular basis to corporate management and the Board. In addition, the audit committee plays an important role in reviewing and follow-up of the risk areas. The main risk factors resulting from the risk reviews are underlined and focused in the coming year’s audit plan.
For internal control purposes, the Group has established policies and procedures in an integrated Business Management System. The aim is to increase quality in all processes and strengthen the control environment in the Company. The company also has an internal audit function with annual audits of the main business units. The audit committee oversees the internal control activities and has a specific mandate in following up and monitoring internal control over financial reporting.
For a more comprehensive description of risk and risk management in DNO (link).
11. Remuneration of the Board of Directors
The remuneration of the Board of Directors is decided by the AGM and is not linked to the Company’s performance. No share options have been granted to members of the Board.
12. Remuneration of the executive personnel
Remuneration of DNO’s key personnel including the Chief Executive Officer is evaluated and recommended by the remuneration committee as described in their mandate. The remuneration for the managing director is evaluated annually and approved by the Board . The Chief Executive Officer is entitled to an annual bonus based on an evaluation by the Board of Directors and the bonus is made at the Board’s discretion.
The Board of Directors also approves, on a general basis, the remuneration and terms of employment for senior executives reporting to the Chief Executive Officer. Some of these employees have bonus arrangements which are determined at the discretion of the Board of Directors.
The remuneration of key management is presented in the notes to the annual accounts.
The shareholdings by the Board of Directors is also specified in notes to the accounts.
13. Information and communication
DNO is committed to treating its Norwegian and international investors equally and ensuring that it provides timely information so that a value assessment of the Company can be performed on the best possible basis.
DNO’s financial accounts are transparent and in accordance with IFRS and industry standards relevant for the oil and gas sector, The interim reports and other relevant information are published on DNO’s website and on the Oslo Stock Exchange.
Further on, DNO publishes an annual financial calendar showing important dates and events such as quarterly presentations. All information to shareholders is published on the website at the same time as it is sent to the shareholders.
DNO’s investor relations policy encourages open communication with the capital market and the shareholders. DNO regularly holds presentations for investors and analysts, as well as the scheduled quarterly presentations.
14. Takeover
The Board has not established any specific guiding principles for how it will act in event of a take-over bid situation.
However, in the event of a bid situation, the Board has a responsibility to ensure that all shareholders are treated equally and that the business activities are not disrupted unnecessarily. The Board has a particular responsibility to ensure that shareholders are given sufficient information and time to evaluate the bid. The Board wil in this situation evaluate the bid and make a statement which includes an evaluation of the bid and a recommendation as to whether the shareholders should accept or not. The statement should clearly state that the evaluation from the Board is unanimous.
15. Auditor
DNO’s external auditor is elected by the AGM, which also approves the auditors’ fees for the parent company.
The auditor presents an audit plan for the audit committee annually. According to mandate for the audit committee, the auditor has at least one meeting with the audit committee per year where the administration is not present, and participates in audit committee meetings for review of the Company’s internal control and risk management system.
The auditor participates in board meetings where the financial statements are discussed and other meetings where it is considered appropriate.
Information about the auditor’s fees, including a split between audit and other services, is included in the notes to the financial statements according to the Norwegian Accounting Act.
DNO’s external auditor is Ernst & Young AS.