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Investor Relations

Corporate Governance

“Ekornes sees good corporate governance as involving candid, substantive and responsible dialogue and interaction between shareholders, the board of directors and the company’s management, based on a long-term perspective and with value creation as its aim.”

Corporate governance
Ekornes sees good corporate governance as involving candid, substantive and responsible dialogue and interaction between shareholders, the board of directors and the company’s management, based on a long-term perspective and with value creation as its aim. At the same time, the board and company management must work effectively together, there must be respect for shareholders and an open and honest dialogue with all stakeholder groups.

1. Corporate governance in Ekornes
Ekornes’ board and management endorse the Norwegian Recommendation for Corporate Governance. This recommendation has been reviewed annually to ensure that it is complied with, (in February 2010 as per the recommendation of 21 October 2009) and for the most part, it is. Any non-compliance with respect to the recommendation will be commented. As a result of this internal process, the company has issued an internal code of conduct. The guidelines for the company’s values and ethical code of conduct are included in the company publications “Objectives and Values” and “Code of Ethics” for the Ekornes Group.

2. Business
Ekornes shall be one of the most attractive and leading brand name suppliers of furniture and mattresses for home use, both nationally and internationally. The company’s articles of association are more general with regard to deﬁ ning what business activities the company shall undertake. Article 2 of the company’s articles of association states: “The company’s purpose is to operate business activities and whatever may be associated with this, including participation in other companies.” The strategies, goals and values that apply to the company’s business are set out in its handbook “Objectives and Values for the Ekornes Group”.

3. Share capital and dividend

Equity
Ekornes shall have an equity ratio of at least 40-50 per cent after dividends and less the value of forward contracts. The board feels it is important for the company to have sufﬁ cient ﬁ nancial ﬂ exibility and strength at any time. As at 31 December 2009, Group equity totalled NOK 1,570.0 million (76.7 per cent). Corrected for the proposed dividend for 2009 and the value of forward contracts as at 31 December, equity totalled NOK 1,223.3 million (63.7 per cent).

Dividend policy
Ekornes will manage its shareholders’ investments in such a way that their return, measured as the sum of dividend and increase in share price, will be as high as possible over time. The company aims to pay a dividend each year. At least 30-50 per cent of the Group’s proﬁ t after tax will be paid as dividend. However, account will be taken of the level of capital expenditure and the rate of growth. The company will strive for stability in its dividend policy. The Annual General Meeting (AGM) determines the dividend to be paid each year on the basis of a proposal tabled by the company’s board of directors.

In 2008, a dividend of NOK 3.50 per share was paid out. The board proposes to the AGM that a dividend of NOK 7.00 per share be paid for 2009, which corresponds to 79.4 per cent of the year’s proﬁ t after tax. The company’s ﬁ nancial position is sound. However, in proposing a dividend for 2009, the company has attached importance to the company’s sound liquidity position, a relatively modest investment programme for 2010, a very good order situation at the beginning of 2010 and the fact that it will not be necessary to utilise the drawing facilities available to the company through its banking connections. This was done in 2008 in order to ﬁ nance the payment of the 2007 dividend.

Authorisation of the board of directors – share capital increase and purchase of own shares
No such authorisation currently exists. The most recently granted authorisations were granted by the AGM on 10 May 2007. These expired on 30 June 2008. The board of directors has not used the authorisations granted. The granted authorisations were intended for speciﬁ c purposes. Also, in the event of future presentations before the AGM requesting authorisations, each individual purpose will be presented for consideration and a vote.

4. Equal treatment of shareholders and transactions with closely related parties
The company has only one class of shares. In principle, existing shareholders have pre-emption rights with respect to any share capital increase. Particular circumstances may result in this principle being waived. A proposal explaining the reason for such a waiver will then be put to a general meeting of shareholders for a ﬁ nal decision. The general meeting has so far authorised limited purchases of own shares in order to acquire the number of shares required in respect of the bonus and option schemes in effect at any time. As per today, the company has no schemes requiring this type of authorisations. The current bonus schemes for the management and other employees are paid in cash. Any trading in own shares is to be conducted through the stock market.

Otherwise, the company abides by the proposed guidelines for transactions with closely related parties, under the terms of which valuations by independent third parties and notiﬁ cation to the board of directors shall be carried out in the event of non immaterial transactions or material interests. The company’s articles of association place no restrictions on voting rights. All shares are equal.

5. Free transferability
According to Article 5 of the company’s articles of association, “Shares are freely transferable”. Ekornes endeavours to maintain an open and active dialogue with investors to create the broadest possible interest in the company, both in Norway and abroad.

6. General meetings
The Annual General Meeting for 2010 will be held on 11 May 2009. The company’s procedures and arrangements with regard to the holding of the AGM are in complete compliance with the guidelines set out in the “Norwegian Recommendation for Corporate Governance”.

The invitation to the AGM and the minutes are available from the company’s website, www. ekornes.com – under Investor Relations. The invitation shall be sent out at least 21 days before the date set, which meets the minimum statutory requirement and the requirements of the new recommendation. The company’s ﬁnancial calendar is published through the Oslo Stock Exchange and is available from the company’s website, www.ekornes.com

Shareholders may give notiﬁ cation of their intention to attend the AGM by post, fax or e-mail. The board encourages as many shareholders as possible to attend the AGM. Shareholders who are unable to attend in person are encouraged to do so by proxy. The company will help arrange proxy authorisations. Proxy authorisation may be restricted to speciﬁ c items on the agenda. Information relating to the procedures for meeting with a proxy, a proxy form and information about the appointed person who may vote for the shareholders as proxy are enclosed with the notice of meeting. As a minimum, the chairman of the board, the chairman of the selection committee and the auditor shall attend. Management shall be represented by at least the CEO and the CFO. At the opening of the AGM, arrangements will be made to elect an independent chair, which is in line with the recommendation. When electing members of the board or other company bodies, it shall be possible to vote for individual candidates. The outcome of elections in the general meeting will be published immediately (and within the recommended deadline) after the general meeting is held.

7. Nomination committee
The nomination committee requirements are set out in Article 9 of the company’s articles of association, and the committee shall comprise four members elected by the AGM.
The members must be shareholders or shareholder representatives. During the previous year, the nomination committee was made up of:
• Birger Harneshaug, Nordea Equity Holdings AS (chair)
• Berit Ekornes Unhjem (private/shareholder)
• Tomas Billing (Nordstjernan AB)
• Øystein Stephansen (Vital Forsikring ASA)
None of the selection committee’s members is a company director or member of group management. The nomination committee’s remuneration is determined by the AGM.

8. Corporate Assembly and board of directors, composition and independence
The company does not have a Corporate Assembly. The board of directors comprises ﬁ ve – 5 – members elected by the shareholders. The selection committee proposes names for shareholder-elected candidates before the elections. Furthermore, the board of directors comprises three – 3 – members and one – 1 – observer elected by and from the workforce. An agreement with the employees, approved by the Company Democracy Committee, underpins this arrangement. According to the company’s articles of association, the board of directors shall comprise 3-8 members at the decision of the AGM. The majority of shareholder-elected directors are independent, both with respect to group management, important business associates and the main shareholders. Directors are elected by the AGM for a term of two – 2 – years. Olav Kjell Holtan has chaired the board since June 1990. No member of group management is a director. Ekornes has endeavoured to ensure that directors’ backgrounds, competence and capacity are suited to the Group’s business activities and its need for diversity. All shareholder-elected board members are independent with respect to the company’s business connections. With the exception of Stian Ekornes and Nora Førisdal Larssen (deputy) all board members are independent of the company’s main shareholders. For further information, please see the presentation of the board elsewhere in this annual report.

9. Board responsibilities
Norwegian law lays down the tasks and responsibilities of the board of directors. These include the overall management and supervision of the company. Towards the end of each year, the board adopts a detailed plan for the following ﬁ nancial year. This plan covers the follow-up of the company’s operations, internal control, strategy development and other issues. It also includes a discussion and assessment of the board’s experiences and the organisation of its own activities, with proposals for improvement. The company complies with the deadlines issued by the Oslo Stock Exchange with regard to interim reports.

Internal auditing is a ﬁ xed item on the agenda of one board meeting during the year. The company’s auditor is also present at this meeting. The Ekornes Group does not have a speciﬁ c internal auditing unit. Internal auditing of ﬁ nancial matters is led by the CFO, who, together with the group chief accountant/head of corporate accounting, carries out routine follow-up activities. Shared routines, guidelines and procedures have been drawn up within the accounting area. Each month the board receives ﬁ nancial reports showing the Ekornes Group’s performance and status. In connection with the presentation of the annual accounts each year, the CEO and the CFO declare that the accounts have been prepared in accordance with generally accepted accounting principles, and that to the best of their knowledge all information is accurate and no material information has been omitted from the reporting. There is a clear division of responsibilities between the board and management of the company. The board is responsible for making sure that management’s tasks are carried out efﬁ ciently and correctly within the legislative and regulatory framework, and in accordance with the board’s responsibilities. The CEO is responsible for the Group’s day-to-day operations. Job descriptions have been drawn up for the CEO and other senior executives.

The board held nine (9) meetings in 2009. The board emphasises the need to rotate the venue for its meetings to different operational units, both in Norway and abroad. This also includes visiting certain of the company’s customers (distributors). The board’s yearly plan and the minutes of its meetings are not conﬁ dential, except in certain individual cases, in which case this will be made plain to the directors attending the meeting. The smooth working of the board and its working methods and duties are discussed regularly and appear as a speciﬁ c agenda item at one board meeting during the year. The board has not seen a need to follow the recommendation with respect to disclosing board members’ attendances at board meetings in the annual report . This information is reported annually by the board to the election committee. Attendance in general is very good, and has been for a long time.

The board has discussed the need to appoint board committees. The board has appointed a separate remuneration committee for consideration and presentation of guidelines and proposals for remuneration to upper management. A separate audit committee consisting of three members selected from the board of directors (two elected by the shareholders and one employee representative) will be appointed in the spring of 2010. The committees will handle the preparations for presenting recommendations to the board of directors, however the entire board of directors will participate in the ﬁ nal consideration of all items to ensure the best treatment of the matters at hand. The company’s remuneration policy and remuneration for the CEO and senior personnel are dealt with in one of the board meetings and accounted for in the directors’ report. Separate proposals in respect of these matters are also presented to the AGM for consideration.

10. Risk management and internal control
The board of directors regularly receives ﬁ nancial reports that cover the board’s need for follow-up. The internal control systems relating to the ﬁ eld of accounting/ﬁ nance comprise job descriptions, procedures, control routines and guidelines/templates for organising and performing the company’s ﬁ nancial reporting and the content/quality of this. The work also includes the organisation and performance of Health, Safety and Environment activities, which ensure that the company operates in compliance with relevant laws and regulations, and its internal rules and guidelines.

The company guidelines, laid down in “Objectives and Values for the Ekornes Group” and “Code of Ethics”, provide guidance for employees in order to reduce the possibility of the company being placed in situations that may harm the company’s reputation or ﬁ nancial standing. Evaluation of the operational risk, which includes marketing and sales development, production and development in the raw materials markets, are among those areas that are continuously reviewed and reported by the board of directors. Relevant areas of risk, including foreign currency, HSE, internal auditing, ﬁ nances and IT are reviewed annually as a minimum.

A separate section, “Risk management”, in the annual report contains further information.

11. Directors’ fees
Directors’ fees are determined by the general meeting. Directors’ fees are not performance-related and share options are not granted to directors elected by the shareholders. All forms of remuneration to the company’s directors are speciﬁ ed in the Notes.

12. Remuneration for senior executives
Guidelines for remuneration of upper management are determined by the board of directors after recommendations from the Remuneration Committee. The CEO’s compensation package is determined at a meeting of the board. The framework for any share option scheme is determined by the board. If it should be necessary to purchase own shares in order to implement this type of scheme, this shall be decided by the company’s general meeting. There are currently no such schemes. The last option scheme expired on 31 December 2008, without any of the criteria being fulﬁ lled. Former allocations (for the years 2005-2007) were reversed at 31 December 2008. See also the accounts with Notes. The current bonus schemes for the management and other staff are explained in greater detail in the Notes. These schemes are tied in with the company’s proﬁ tability (net proﬁ t ratio and overall earning capacity). All elements of the remuneration paid to the CEO and board members are also speciﬁ ed in the Notes to the ﬁ nancial statements. The company’s compensation policy and the guidelines for compensation for the CEO and senior employees are detailed in the Notes, which are presented to the company’s AGM in May.

13. Information and communication
A calendar of the most important dates is published on the Oslo Stock Exchange and on the company’s website. Information to the company’s shareholders is distributed via the Oslo Stock Exchange and the company’s website on an ongoing basis, immediately after decisions have been made. All interim reports and documents connected with general meetings are also sent directly to shareholders. The company’s ﬁ nancial calendar is published on the company’s website www.ekornes.com – Investor Relations.

Communications strategy
Ekornes is subject to the Oslo Stock Exchange’s regulations regarding information which may inﬂ uence the price of Ekornes’ shares. Taking this into consideration, the company’s goal is for all employees to be well informed about the company’s situation at any time. The company also wishes employees to be well informed about what is happening in other parts of the organisation. Management will ensure that the ﬂ ow of such information is systematic and its publication predictable. Moreover, Ekornes shall be associated with integrity, candor and high ethical standards. A separate internal communications plan has been prepared. Ekornes feels it is very important for shareholders and investors to be fully informed about the Group’s performance and ﬁ nancial position. It is also important for information to be made available to the entire stock market at the same time. The company strives to treat all shareholders/investors and analysts equally. Company management holds open presentations in connection with the publication of each interim report. Two of the open presentations (yearly and half-yearly) were transmitted by direct webcasts. The webcasts were simultaneously translated into English. Due to low audience ﬁ gures, however, the company has decided to webcast only two of the presentations. Group management also holds regular meetings with analysts, investors and shareholders during the year. The exchange of information with distributors and suppliers is important to promote mutual predictability and understanding for each party’s strategy and actions.

Ekornes is developing its IT systems to improve the day-to-day ﬂ ow of information between Group companies and key distributor organisations and suppliers. Ekornes’ own information and communication systems will be continually updated to promote increased productivity.

14. Acquisition
The parent company Ekornes ASA’s articles of association contain no limitations with regard to share acquisition. The shares are freely transferable. Transparency and equal treatment of shareholders is a fundamental policy.

15. Auditor
The company’s principal auditor is KPMG. Each autumn the auditor prepares a plan for auditing activities in the coming year. The auditor attends the board’s review of the company’s internal auditing activities and provides his assessment of the status of the company’s accounting practices, reporting requirements and internal controls. As a new Audit committee will be appointed in the spring of 2010, the audit plan and the company’s internal control will become an integrated part of the cooperation between the auditor and the audit committee. The audit committee will monitor the neutrality of the auditor.

For large-scale consultancy projects, Ekornes uses qualiﬁ ed providers other than the company’s auditor, who is given any resultant reports to read through and comment on. This practice has been chosen to comply with the requirement for auditor independence. However, the auditor is used in connection with activities that are closely related to the auditing function, such as assistance with the preparation and veriﬁ cation of the consolidated accounts and tax returns, interpretation of accounting and tax regulations, and as a discussion partner with respect to audit-related matters. Each year, the general meeting is informed of the company auditor’s remuneration, allocated between ordinary auditing and other services. The amounts are accounted for in the Notes.

16. Other issues
Management of subsidiariesAll subsidiaries of the Ekornes Group have their own boards of directors, in which the parent company is represented by members of group management. With the exception of Stay AS, the general managers of the Group’s Norwegian companies do not sit on their respective boards, but attend board meetings. The general managers of some of the Group’s non-Norwegian companies are also directors of their respective companies.

Business ethics
A separate code of conduct has been drawn up and distributed to all employees. The code of conduct has also been distributed to external relations and is published on the company’s website www.ekornes.com