RNB RETAIL AND BRANDS AB (publ), RNB, is a Swedish public limited liability company listed on the Nasdaq OMX Stockholm. The control of RNB is divided among the shareholders at the Annual General Meeting (AGM), the Board of Directors and the President in accordance with the Swedish Companies Act, the Articles of Association and the Swedish Code of Corporate Governance.
Swedish Code of Corporate Governance
This Corporate Governance Report was prepared in accordance with the provisions of the Swedish Code of Corporate Governance as well as with chapter 6, sections 6 – 9 of the Annual Accounts Act and chapter 9, section 31 of the Companies Act, and pertains to fiscal year 2011/2012. RNB’s Articles of Association and other corporate-governance information about the company are available at www.rnb.se.
Shares and shareholders
At August 31, 2012, the share capital of RNB was SEK 165,425,251 represented by 165,425,251 shares with a quotient value of SEK 1. All of the shares are common shares. Each share entitles the holder to one vote at the AGM and all shares provide equal entitlement to shares in the company’s assets and earnings.
At August 31, 2012, the number of registered shareholders was 9,807, of whom 9,515 were registered in Sweden. At August 31, 2012, the three major shareholders were Konsumentföreningen Stockholm (KfS) which held 21.7%, Axbrands AB which held 7.0% and Mikael Solberg, via companies, who held 5.6 % of the voting rights. In addition to Konsumentföreningen Stockholm, there are no other shareholders holding more than 10% of the votes.
Annual General Meeting
The Annual General Meeting (AGM) is RNB’s highest decision-making body. The AGM appoints the company’s Board of Directors. It is also responsible for adopting the company’s balance sheets and income statements, making resolutions concerning the disposal of profits from operations and discharging members of the Board and the President from personal liability. The AGM also elects RNB’s auditors.
The AGM must be held no later than six months after the end of the fiscal year. Notification of the AGM and of general shareholder meetings convened to address a motion concerning amendment of the Articles of Association must take place no earlier than six weeks before and no later than four weeks before the AGM. Notification of other general shareholder meetings must take place no earlier than six weeks before and no later than three weeks before the AGM. All shareholders registered in the share register and who have notified their attendance in time are entitled to attend and vote at the AGM. Those shareholders who are unable to attend in person may be represented by a proxy. Minutes from previous AGMs and Extraordinary General Meetings are available on www.rnb.se.
The task of the Nomination Committee is to prepare and submit proposals to shareholders in the company pertaining to such matters as the nomination of Board members and, if applicable, auditors. The Chairman of the Board shall annually, at least six months prior to the AGM, contact the four largest shareholders in the company who shall each appoint one member of the Nomination Committee. The Chairman of the Board is to be co-opted to the Nomination Committee but must not be its chairman. The Chairman of the Board shall also ensure that information on the composition of the Nomination Committee along with contact information is publicized in adequate time prior to the AGM. The Chairman of the Board shall also report to the Nomination Committee the current status of the Board’s work, requirements for specialist expertise and other matters that may be significant to the Committee’s work. It shall be possible for shareholders to submit proposals to the Nomination Committee for further evaluation within the parameters of its work. The Nomination Committee holds meetings as necessary, but at least once annually.
Prior to the AGM to be held on January 17, 2013, the Nomination Committee comprises the following members who were appointed in accordance with a resolution by the 2012 AGM: Sune Dahlqvist, Chairman of Konsumentföreningen Stockholm, Ulf Strömsten, Catella Fondförvaltning, Jan Litborn representing Douglas Invest AS and John Wallmark, Spartoi AB.
Board of Directors
RNB’s Board of Directors makes decisions on matters pertaining to RNB’s strategic focus, investments, financing, organizational issues, acquisitions and divestments. The Board’s work is governed by the Swedish Companies Act, the Articles of Association and the formal work plan established by the Board for its work. In accordance with the Articles of Association, the Board shall consist of no fewer than five and no more than eight members, with no deputies. Members are elected at the AGM for the period up to the end of the following AGM. RNB’s Articles of Association do not contain any stipulations concerning the appointment and dismissal of Board Members.
At the AGM on January 19, 2012, the following Board members were re-elected; Laszlo Kriss, Lilian Fossum Biner, Mikael Solberg, Torsten Jansson and Jan Carlzon. The AGM elected Ivar Fransson and Per Thunell as new Board members. Magnus Håkansson and Nils Vinberg declined re-election at the AGM, following which the Board comprised seven members. The President and CEO is co-opted to the Board.
Articles of Association
The Articles of Association may only be amended at the AGM or an Extraordinary General Meeting. The Articles of Association are available at www.rnb.se.
Remuneration of the Board of Directors
The director fees paid to the members of the Board, which were adopted by the 2012 AGM, total SEK 1,187,500, of which SEK 300,000 was to be paid to the Chairman of the Board and SEK 137,500 to each other non-executive Board member, as well as a fee of SEK 62,500 to the chairman of the Audit Committee.
Board of Directors’ formal work plan
RNB’s Board of Directors has a formal work plan that complies with the Swedish Companies Act in terms of work distribution and reporting. The formal work plan governs the Board’s meetings, issues to be addressed at Board meetings, the Chairman’s assignments, the President’s assignments and certain other matters.
The Board holds six scheduled Board meetings during a fiscal year and, if necessary, extaordinary meetings. Four of the scheduled meetings are held in connection with publication of each of the four quarterly reports, one is reserved for strategy issues and one sceduled meeting addresses the budget for the following fiscal year. In addition to the statutory metting and sceduled meetings, the Board held five extraordinary meetings during the 2011/2012 fiscal year. the scheduled meetings focused primarliy on earnings follow-ups, investment matters, external reporting, budgets and strategy issues. The extraordinary meetigs adressed financing and liquidity issues, the establishment of a production organization in Asia, franchisee-related issues and the outsourcing IT activities.
Within the Board, there is a Remuneration committee and an Audit Committee.
RNB RETAIL AND BRANDS AB (publ) has determined that the Board fulfills the listing agreement of the Nasdaq OMX Nordic Stock Exchange and the Swedish Code of Corporate Governance pertaining to requirements concerning independent Board members.
The task of the company’s Remuneration Committee, which is appointed by the Board, is to review and provide the Board with recommendations concerning the principles for remuneration of the company’s senior executives, including performance-based remunerationand pension benefits. Issues pertaining to the President’s terms of employment, remuneration and benefits are prepared by the Remuneration Committee and resolved by the Board of Directors.
Since the 2012 AGM, the company’s Remuneration Committee has comprised Ivar Fransson, Jan Carlzon and Mikael Solberg.
The task of the Audit Committee, which is appointed by the Board, is to support the Board in fulfilling its responsibilities with respect to quality assuring the company’s financial reporting. The Committee is responsible for continuous contact with the company’s auditors to keep itself informed of the focus and scope of the audit and to discuss views on the company’s risks. The Audit Committee shall also establish guidelines for the procurement of services other than audit-related activities from the company’s auditors. The Committee is also responsible for examining the accounting records and providing this information to the Nomination Committee, and for assisting the Nomination Committee in the preparation of proposals for auditors and fees for audit work. During the 2011/2012 fiscal year, the Audit Committee comprised Lilian Fossum Biner, Laszlo Kriss and Per Thunell.
RNB’s auditors are elected by the AGM. RNB’s auditors are Ernst & Young AB, with Johan Eklund as the Auditor in Charge. Ernst & Young AB has been RNB’s auditor since 2004.
The auditors examine the Board’s and the President’s management of the company and the quality of the company’s accounting documents. The auditors report the results of their examination to shareholders through the Audit Report, which is presented at the AGM. In addition, the auditors submit detailed reports to the Audit Committee at scheduled Audit Committee meetings and to the Board once annually. In addition to the audit, Ernst & Young performs certain other services for RNB. RNB believes that the execution of these services does not compromise the independence of Ernst & Young. During the fiscal year, the services provided primarily comprised consultancy services pertaining to tax and accounting.
To date, RNB has not found any reason to establish a specific internal audit function. The company conducts ongoing work on internal control and a number of control activities have been implemented. The issue of a specific internal audit function will be assessed annually.
President and Group Management
The President manages operations in accordance with the approved formal work division between the President and the Board as well as the Board’s instructions. The President is responsible for keeping the Board informed and ensuring that the Board has the necessary information and as complete decision-making documentation as possible. The President also keeps the Chairman of the Board informed of the company’s and Group’s development and financial position.
The President and other members of Group Management hold meetings continuously during the year to review budget follow-ups and plans and to discuss strategic issues. RNB’s Executive Group Management consisted of seven members, of whom two are women.
Control of the business areas is conducted via intra-Group Boards in subsidiaries comprising the CEO, CFO and at least one president of a sister company are Board members. The boards have formal work plans that comply with the Companies Act regarding the division of duties and reporting. The work plans regulate meetings of the boards, the issues to be addressed at board meetings, the assignments of the chairmen, the assignments of the presidents and certain other matters. The boards have scheduled meetings every quarter with business including dealing with earnings follow-ups, action plans, investment matters and other matters.
Remuneration of the President and senior executives
Salaries for persons in company management comprise a fixed part in the form of basic salary, and a variable part, bonus. The bonus is dependent upon the achievement of goals set for the company and the individual. For members of company management, the bonus may not exceed SEK 750,000 for each person.
The Board is responsible for the existence of an efficient system for internal control and risk management. The President has been delegated the responsibility of creating a solid basis for working on these issues. Both Group Management and managers at various levels in the company have this responsibility within their specific areas. Authority and responsibility are difined in guidelines, responsibility descriptions and authorization instructions.
The aim of the company´s internal control is to create prerequisites for conduction operations and in which demands, goals and frameorks are distinctly defined. The control is ultimately aimed at protection the company´s assets and thereby the shareholders´ investments. Internal control at RNB complies eith an established framework and consists of the folowing components: Control environment, risk assessment, control activities, information and communication and follow-up.
The control environment constitutes the foundation for the internal control. The control environment consists primarily of ethical values, integrity, expertise, management philosophy, organizational structure, responsibility and authority. RNB’s internal work plans, instructions, policies, guidelines and manuals in this connection are important since they are used as guidelines for employees. A distinct division of roles and responsibilities and the provision of instructions for the President ensure the efficient management of operational risks at RNB. The President reports to the Board on a regular basis. In respect of operating activities, the President is responsible for the system of internal controls that is required to create a control environment for significant risks.
Risk assessment and control activities
RNB also has guidelines and policies governing financial control and monitoring, communication issues and business ethics. Frameworks for credit and currency management, financial control and follow-ups are established through financial and accounting policies. The company takes out insurance policies tied to property values and loss of earnings based on analysis of need and risk.
In addition, RNB has a Code of Conduct that applies to the entire Group and all of the Group’s suppliers. The Code of Conduct, which is based on a series of internationally accepted conventions, is an expression of the values and guidelines that apply within the Group in terms of business ethics, freedom and rights.
The Board’s opinion is that there is sufficient understanding among employees of the need for adequate control of financial reporting. In brief, RNB’s internal control structure is based on work distribution between company bodies, reporting to the Board, established policies and guidelines, and the fact that employees comply with the policies and guidelines, thus ensuring adequate control of financial reporting.
RNB analyzes risk on an ongoing basis to identify potential sources of error within its financial reporting. The company has identified the processes in which the risks for significant errors in financial reporting may be supposed to be relatively higher than in other processes, due to complexity in the business process, or due to high amounts or large transaction volumes. Among other areas, RNB has documented vulnerability in certain IT systems and identified the risk of incorrect valuations and slow-moving inventories, including assessments of obsolescence. The documentation and subsequent risk assessment have resulted in a number of countermeasures and control activities. Normal control activities comprise account reconciliations and support controls. The aim of all countermeasures and control activities is to prevent, discover and correct any mistakes or deviations in financial reporting. The objective is to continue monitoring control activities during coming fiscal years.
Risks are deemed to exist regarding the valuation of goodwill and brands as well as for nonperforming receivables and deferred tax assets. On every balancesheet date or if indications point to a decline in value, impairment tests of goodwill and brands are performed to calculate the fair value of the underlying assets. In this context, assumptions concerning the future, growth, profitability and financing are key parameters. These parameters are also important in assessments of going concerns. The counterparties’ ability to meet their obligations for accounts receivables is assessed continuously. Deferred tax assets tied to loss carryforwards are recognized to the extent that future surpluses can be utilized against the deferred tax assets.
Information and communication
Correct internal and external information requires that all parts of the operations efficiently exchange and report relevant significant information on operations. To achieve this, RNB has issued policies and guidelines pertaining to the handling of information in the financial process, which have been communicated from Group Management to employees. During the fiscal year or in the period thereafter, no infractions have occurred that have led to disciplinary measures from Nasdaq OMX or to a statement from the Swedish Securities Council.
The Board continuously evaluates the information submitted by company management. The Board also monitors the efficiency of the work of company management. The Board’s work includes ensuring that measures are implemented to address the inadequacies and suggestions for corrective measures that may have arisen from the external audit.