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Corporate Governance report
Swedish Match AB (publ) is a public Swedish limited liability company. The objective of the Company’s operations, as stated in the Company’s Articles of Association, is to directly or indirectly conduct business relating to the development and manufacture of and trade in tobacco products, matches and lighters and to carry out other activities that are related to these businesses.
The Company and the Group are governed on the basis of the Company’s Articles of Association, the Swedish Companies Act, the listing agreement pertaining to listing of the Company’s shares on the OMX Nordic Exchange in Stockholm, the Swedish Code of Corporate Governance and other applicable laws and regulations. The Articles of Association, in its entirety, is available on the Company’s website: www.swedishmatch.com.
Because of a prior listing on the American NASDAQ stock exchange, Swedish Match has been registered with the US Securities and Exchange Commission (SEC). During 2007, Swedish Match terminated its registration with SEC and is thus no longer under obligation to report to the SEC.
Swedish Match applies the Swedish Code of Corporate Governance. The Company is not reporting any deviations from the Code for 2007, except with regard to the Code’s rule that the Company’s half-year or nine-month report be reviewed by the Company’s auditors. The reason for this deviation is that the Board of Directors, with reference to the Company’s stable operations, was of the opinion that the extra cost that would be incurred by such a review was not warranted.
This Corporate Governance Report, with the exception of the report on internal control, has been examined by the Company’s auditors but does not represent part of the formal annual report.
General Meeting
The General Meeting constitutes the highest governing body in a limited liability company and shareholders’ rights to participate in resolutions regarding the Company’s affairs are exercised at General Meetings. The Company’s shareholders have been informed of their legal rights to have issues dealt with at General Meetings through the Company’s website at www.swedishmatch.com. Each share entitles the holder to one vote at a General Meeting. Resolutions adopted by General Meetings are generally resolved by a simple majority. However, according to the Swedish Companies Act, certain matters are to be decided by a qualified majority.
The Annual General Meeting must be held within six months of the close of the fiscal year. At the Annual General Meeting, resolutions are adopted concerning such matters as dividends, approval of the annual report, discharge of the Board of Directors and the President from personal liability, election of members of the Board of Directors and, wherever applicable, auditors, compensation to the Board of Directors and auditors, principles to be followed for determining compensation to senior executives and other matters of importance to the Company.
The Annual General Meeting for 2007 was held on April 23. The minutes of the meeting are available on the Company’s website www.swedishmatch.com.
Nominating Committee
Up to the 2007 Annual General Meeting and, apart from the former Chairman of the Board, Bengt Magnusson (convener), the Nominating Committee consisted of William N. Booth (Wellington Management Company), Mads Eg Gensmann (Parvus Asset Management), Michael Allison (Morgan Stanley Investment Management) and Andy Brown (Cedar Rock Capital).
Pursuant to a resolution adopted at the 2007 Annual General Meeting, the Nominating Committee shall consist of five members. The Annual General Meeting resolved to empower the Chairman of the Board to contact the largest known shareholders of the Company in order of size and, until four representatives had been appointed, ask each of them to appoint a representative who, together with the Chairman of the Board, would constitute the Nominating Committee until the time of the appointment of a new Nominating Committee pursuant to the authorization received from the following year’s Annual General Meeting. After the Chairman of the Board, Conny Karlsson, had contacted the Company’s largest shareholders, the Nominating Committee was constituted on October 4, 2007 with William N. Booth (Wellington Management Company), Mads Eg Gensmann (Parvus Asset Management), Michael Allison (Morgan Stanley Investment Management) and Andy Brown (Cedar Rock Capital) as members, in addition to the Chairman of the Board, Conny Karlsson. Of the members of the Nominating Committee, only Conny Karlsson was also a member of the Board. Mads Eg Gensmann served as Chairman of the Nominating Committee. Fredrik Peyron, who was appointed Company’s general counsel on February 1, 2007, served as secretary to the Nominating Committee.
Pursuant to instructions established by the General Meeting, the Nominating Committee’s duties are to prepare and submit proposals to the General Meeting concerning the election of the Chairman of the Annual General Meeting, the election of the Chairman and other members of the Board, directors’ fees divided between the Chairman of the Board and other Board members, and any fees for committee work, as well as, if applicable, the election of and fees to be paid to the auditors.
Proposals to the Nominating Committee can be submitted to the Nominating Committee’s secretary, Fredrik Peyron. As part of the process for nominating Board members prior to the 2007 Annual General Meeting, the Nominating Committee conducted an evaluation of the Board of Directors in the autumn of 2006. During the year the Nominating Committee also addressed the issue regarding auditors to be elected at the Annual General Meeting 2008.
The Nominating Committee shall meet as often as necessary to discharge its duties, and at least once per year. During 2007, the Nominating Committee held two meetings prior to the Annual General Meeting and three meetings thereafter. The 2007 Annual General Meeting decided that no fees be paid to the members of the Nominating Committee but that expenses of the Nominating Committee were to be borne by the Company.
Board of Directors
Composition
According to the Articles of Association, the Company’s Board of Directors must consist of at least five and at most ten directors, apart from those persons who pursuant to law may be appointed according to other arrangements. At the end of 2007, Swedish Match’s Board of Directors consisted of eight members elected by the General Meeting plus three employee representatives and their three deputies.
During the year, the Board of Directors consisted of the following directors elected by the General Meeting: Bernt Magnusson (until the Annual General Meeting), Conny Karlsson, Sven Hindrikes, Arne Jurbrant, Karsten Slotte (until the Annual General Meeting), Kersti Strandqvist, Meg Tivéus and Andrew Cripps, as well as Charles A. Blixt and John P. Bridendall, who were elected as members at the 2007 Annual General Meeting. During the year, employee representatives on the Board were Kenneth Ek, Eva Larsson and Joakim Lindström, with Håkan Johansson, Eeva Kazemi Vala and Gert-Inge Rang (as of the April 2007) as deputies.
Meetings
The Board of Directors is summoned to five scheduled and one statutory meeting per year. Three of the scheduled meetings are coordinated with the dates of the financial information for the first and third quarters and of the year-end report. In addition, the Board meets in August/September and in December to discuss the strategic plan and the operational budget.
The auditors participate in the Board meeting at which the annual accounts for the fiscal year are presented in order to communicate their observations from the audit. The auditors have also met with the Board without Company representatives. In addition to the scheduled Board meetings, the Board is called to additional meetings convened at the discretion of any director or of the President.
Responsibilities of the Board of Directors
The Board of Directors is primarily responsible for Swedish Match’s general and long-term strategies and goals, adopting the budget and business plans, reviewing and approving the financial accounts, establishing overall policies and making decisions regarding investments and divestments.