Corporate Governance 2015

The MT Højgaard Group is a jointly controlled entity pursuant to an agreement made between the two owners.

This report describes the key elements of the Group's corporate governance.

The internal control and risk management systems related to the financial reporting process are described in connection with the report as required by the Danish Financial Statements Act.

Communications
The Group publishes information on an ongoing basis taking into account commercial and strategic interests as well as the fact that the two owners’ shares are listed and therefore subject to the disclosure requirements for listed companies. The Group thus publishes annual reports and interim financial reports with a form and content broadly in line with the requirements for listed companies.

The Group wishes to keep the public – including investors, analysts, the media and other stakeholders – openly, accurately and fully informed, in particular about results achieved and the planned and expected development. The aim is to achieve a steady high level of information, active distribution of news as well as equal access to information.

The purpose is to improve and maintain knowledge of and confidence in the Group in order to ensure the best possible basis for decisions regarding the purchase and sale of the owner companies’ shares and thus for the price formation of said shares, and to promote a satisfactory transferability of the shares (liquidity). At the same time, the Group aims to enable its other stakeholders to form an opinion of the Group on a well-informed basis. This applies in particular to customers, business partners and existing and potential employees, but also to other stakeholders such as authorities and the media.

Communication by the Group is planned and executed to serve to ensure that the two listed owners meet their disclosure obligations to the stock market, while at the same time supporting the Group's relations to other stakeholders.

The Group informs regularly about the Group’s development in company announcements and press releases, and on this website, the Group provides comprehensive historical and current data as well as instructive information to all stakeholders.

The Group and the owners plan and execute their communication about the companies’ financial development – including annual reports and interim financial reports – to comply with the rules for listed companies, including especially the disclosure requirements in the Danish Securities Trading etc. Act, the relevant executive orders and Nasdaq Copenhagen’s Rules for Issuers of Shares.

The Group publishes financial communication, company announcements and most other communication in both Danish and English.

Tasks and responsibilities of the Board of Directors
The Board of Directors assesses and determines the overall strategy at least once a year with a view to ensuring value creation in the Group.

In this connection the Board, in cooperation with the Executive Board, assesses whether the necessary competences and financial resources are in place to enable the Group to achieve its goals.

At least once a year, the Board defines its most important tasks related to the financial and managerial control of the Group, including how to supervise the work of the Executive Board. The Board of Directors discusses the Group's activities once a year to ensure diversity at the Group’s management levels, including equal opportunities for both sexes, and the Board sets specific targets for the gender composition of the supreme governing body.

The Board reviews its rules of procedure annually to ensure that they are adequate and match the current and expected activities and needs of the Group.

The Board also reviews and approves the rules of procedure for the Executive Board annually, including establishing requirements for the Executive Board’s timely, accurate and adequate reporting to the Board of Directors and for any other communication between the Executive Board and the Board of Directors.

The Board of Directors appoints a Chairman and a Deputy Chairman. The Deputy Chairman acts as Chairman in the Chairman’s absence and also acts as a sounding board for the Chair-man. The tasks, duties and responsibilities of the Chairman and Deputy Chairman are set out in the Board’s rules of procedure.

The Chairman organises, convenes and chairs Board meetings to ensure efficiency in the Board’s work and to create the best possible working conditions for the members, both individually and collectively.

Composition and organisation of the Board of Directors
The members of the Board of Directors are elected by the shareholders in general meeting based on recommendations by the two owners. The recommendations reflect the owners’ assessments of the skills the Board should have to best perform its tasks. Also, the need for integration of new talent and diversity in relation to experience, gender and age should be taken into consideration.

The annual report contains an account of the composition of the supreme governing body, including any special skills possessed by the individual members. For each Board member, the annual report also states position, other management positions and age. The annual report also states when each member joined the Board, when the member was most recently re-elected and when the current election period expires.

On joining the Board, new members receive an induction to the Group.

At least once a year ahead of the Annual General Meeting, the Board assesses whether the number of members is appropriate in relation partly to the Group’s current and expected needs, and partly the opportunities for constructive debate and an effective decision-making process in which all members are given the opportunity to participate actively.

The members of the Board elected by the shareholders in general meeting are chosen by the two owners and are thus not independent according to the definition of this term in the recommendations.

The annual report states which members have been elected among the Group’s employees in accordance with the provisions of the Danish Companies Act on employee representation.

The Board meets at regular intervals according to a predetermined meeting and work schedule or when meetings are deemed necessary or appropriate. In 2015, the Board held six ordinary meetings and one lengthy meeting, to which should be added telephone meetings on current topics.

In its Articles of Association, the Group has set an age limit of 70 for members of the Board of Directors.

The Board has not set up a formalised, recurring procedure for evaluating the performance and results of the full Board, the individual members or the Executive Board.

Management remuneration
The Board of Directors has adopted a remuneration policy for the Board of Directors and the Executive Board. The policy is presented to and approved by the shareholders in general meeting. The policy includes a detailed description of the components of the remuneration, the reasons for selecting each component and the criteria on which the balance between the individual components is based.

The members of the Board of Directors do not receive remuneration in the form of share options. 

The remuneration agreements with the members of the Executive Board comply with the recommendations issued by the Committee on Corporate Governance. The remuneration agreements are not made public.

A warrant programme has been established for the Group leadership team, including the Executive Board. Reference is made to the relevant note in the financial statements.

Risk management and control
The most important risks associated with the realisation of the Group’s strategy and the achievement of its overall goals as well as the risks associated with the financial reporting are identified at least once a year.

The Executive Board reports to the Board of Directors on a continuous basis on the develop-ment and situation within the most important areas of risk and compliance with adopted policies, frameworks, etc., in order to enable the Board of Directors to monitor the development and make the necessary decisions.

The Management’s review in the annual report includes information about the Group’s risk management.

The Board of Directors has established a whistleblower scheme that enables employees and business partners to report non-compliances with the Group’s policies or unlawful acts such as fraud, bribery or corruption. Reports on actual or suspected wrongdoing are made to an independent law firm which will in each case carefully and without any interference consider the facts and documentation of the matter before management makes a decision about the consequences, if any.

Audit
The Board of Directors ensures ongoing dialogue and exchange of information with the Group’s auditors.

Agreements on audit services and fees for same are entered into between the Board and the auditors.

The Board meets with the auditors at least once a year without the Executive Board present.

Audit Committee
The Board of Directors has established an Audit Committee. The committee assists the Board in the monitoring of the financial reporting process and reviewing the adequacy and effectiveness of the internal control systems.

The committee assesses the auditors appointed by the shareholders at the Annual General Meeting and makes recommendations to the Board in relation to the Board’s recommendation of auditors for election at the Annual General Meeting.

The committee also evaluates the company’s CSR policies and programmes and follows up on the whistle-blower scheme.

Lastly, the committee assesses the need for an internal audit function annually.

Financial reporting process

The Group’s accounting and control systems ensure that internal and external financial reporting gives a true and fair view without material misstatement, including that the accounting policies are adequate.

The Group’s accounting and control systems provide reasonable, but not absolute, assurance against material errors and omissions in the financial reporting.

The Board of Directors and the Executive Board regularly review material risks and internal controls in connection with the Group’s activities and their potential impact on the financial reporting process.

Control environment
The Board of Directors considers that management’s approach is fundamental to good risk management and internal control in connection with the financial reporting process. The Board of Directors and the Executive Board therefore continuously endeavour to ensure good risk management and internal control in connection with the financial reporting process.

The Executive Board is responsible for ensuring that the Group’s control environment provides a proper basis for the preparation of the financial reporting. Managers at various levels are responsible for their respective areas.

The Board of Directors and the Executive Board have defined targets and values that form part of the basis for the Group’s strategic development and business plans. In addition, policies, procedures and controls have been established in key areas in connection with the financial reporting process, all on the basis of a clear and available descriptions of organisational structure, reporting lines and authorisation and approval procedures, and relevant segregation of duties has been established.

Risk assessment
The risk of errors is greatest in the items in the financial statements that are based on esti-mates or are generated through complex processes. The Executive Board ensures and coordinates a risk assessment procedure aimed at identifying such items and stating the extent of the associated risks.

The risk management and reporting reflect the fact that the principal business risks in a construction and civil engineering company are in the contracting and execution phases of each project.

Control activities
The purpose of control activities is to prevent, detect and correct any errors or irregularities and to enable estimates to be made that are reasonable in the circumstances.

These activities are integrated in the integrated management systems, financial reporting manuals and business procedures of the individual business areas and subsidiaries. They include approval procedures for contracting of new projects that ensure initial risk assessment and management involvement at various levels, depending on project size and type. Procedures are also in place for monthly reviews with the responsible senior management, including of the risk assessment of the individual projects and of project stage based on updated accounting records and updated expectations concerning remaining production.

A controller function that is independent of management in the commercial units participates in material project reviews in order to verify that the reporting of income and expenses on projects presents a true and fair view.

The recognition of claims and disputes in the financial statements is based on assessments and reports from the Group's legal department. External lawyers are involved in assessments on major claims and disputes.

Lastly, a number of procedures are in place for verifications, authorisations, approvals, reconciliations and analyses of results as well as IT application controls, and more general IT controls.

Information and communication
The Group maintains internal information and communications systems to ensure that the financial reporting is correct, complete and adequate.

Integrated management systems, financial reporting manuals and other reporting instructions are regularly updated. Changes in policies and accounting procedures are disclosed and explained to the parties involved on an ongoing basis.

Monitoring
The Board of Directors monitors the overall disclosure level in the Group’s financial reporting. In addition, the Board has set up an Audit Committee to assist the Board of Directors in the monitoring of the financial reporting process and to review the adequacy and effectiveness of the internal control systems (see the report on the Group’s corporate governance), including that applicable legislation is being complied with, that the accounting policies are relevant and current, and the manner in which material and exceptional items are accounted for.

The Group uses financial, reporting and control systems to monitor its activities. The systems enable the Group to detect and correct any errors or irregularities in the financial reporting at an early stage. This includes any weaknesses detected in internal controls or non-compliance with procedures and policies.

The Group applies the International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements in the Danish Financial Statements Act. All business areas and subsidiaries must comply with the accounting policies, and the Group also has a financial reporting manual that is updated and reviewed on a regular basis. Compliance with the accounting policies and the manual is monitored at Group level. 

Formal confirmations of compliance with accounting policies are obtained annually from all subsidiaries, and requirements concerning compliance with relevant Group policies are incorporated in the companies’ rules of procedure.

All consolidated enterprises report detailed monthly accounting data. These financial data are analysed and monitored at Group and other management levels.

Read MT Højgaard Group’s report on corporate governance 2016
Read MT Højgaard Group’s charter for the audit committee 2016
Read MT Højgaard Group’s remuneration policy 2016