Introduction
OEM International AB (the company) applies the Swedish Code of Corporate
Governance (the Code) in accordance with the NASDAQ Stockholm's
rules for issuers. The Code is aimed at creating good prerequisites for an
active and conscientious owner role and constitutes an element in the
self-regulation of Swedish enterprise. It is based on the "comply or explain"
rule, which means that non-compliance with a term of the Code is not a
breach provided there is an acceptable reason that can be explained. OEM
International has noted a non-conformance with the rules of the Code
concerning the Nomination Committee. The non-conformance is explained
in detail under the heading Nomination Committee.
Division of responsibilities
The purpose of corporate governance is to create a clear division of roles
and responsibilities between the owners, the Board of Directors and the
executive management. Corporate governance in OEM is based on the
Swedish Companies Act and other legislation and regulations, the rules
applicable to companies listed on the stock exchange, the Articles of
Association of the company, the internal governing instruments of the
Board of Directors, the Swedish Code of Corporate Governance and other
internal guidelines and regulations.
Shareholders
OEM International AB is a public company and was listed on the Stockholm
Stock Exchange in December 1983. OEM International AB had 3,917
shareholders at the end of 2019. The ten largest shareholders controlled
75% of the share capital and 91% of the voting rights at year-end. The
following shareholders had, directly or indirectly, shareholdings representing
at least one-tenth of the number of voting rights for all shares in the
company; Orvaus AB 28.8%, Siv Franzén 21.3%, Agne Svenberg and the
estate of Inger Svenberg 19.2% and AB Traction 10.0%.
Articles of Association
The Articles of Association stipulate that OEM International AB is a public
company whose business is to "engage in sales of automatic components
and carry on any and all activities compatible therewith".
The share capital amounts to SEK 38,615,015 and the number of shares
to 23,169,309 divided into 4,767,096 Class A shares with 10 voting rights
each and 18,402,213 Class B shares with one voting right each.
The company's Board of Directors is to consist of not less than four
and not more than seven members. The company shall have at least one
auditor appointed by the Annual General Meeting and a deputy auditor if
the elected auditor is not an auditing firm.
Notice of annual general meetings and extraordinary general meetings
convened for the purpose of amending Articles of Association must be
issued between six and four weeks before the meeting and resolutions
must be supported by shareholders with at least two-thirds of both the
voting rights and the shares represented at the meeting. Notice of extraordinary
general meetings convened for other purposes shall be issued no
later than three weeks prior to the meeting. Notice of an annual general
meeting shall be published in the "Post- och Inrikes Tidningar" newspaper
and on the company's website. It must be announced in Svenska Dagbladet
that notice has been issued.
No limitation to the number of voting rights for represented shares applies
to voting at the general meeting.
There is a pre-emptive clause regarding the A Class shares and a priority
clause in connection with a cash or set-off issue. The current Articles of
Association were adopted at the 2018 Annual General Meeting and can be
viewed on the company's website, www.oem.se (see under The Company/
Corporate Governance/Articles of Association).
Annual General Meeting
The Annual General Meeting is the highest decision-making body in OEM
International AB where the shareholders exercise their voting rights. The
Annual General Meeting passes resolutions concerning the adoption of
the Statement of Income for the Group, the Statement of Comprehensive
Income for the Group, the Statement of Financial Position for the Group
and the Income Statement and Balance Sheet for the Parent Company,
distribution of dividends, election of Board of Directors and, where applicable,
election of auditors, remuneration of Board Members and other senior
executives, remuneration of auditors and other business in accordance
with the Swedish Companies Act and the Articles of Association of the
Company. The Annual General Meeting is to be held in the municipality of
Tranås within six months of the end of the financial year. All shareholders
entered in the share register prior to the meeting who have registered their
participation are entitled to participate and vote for their total shareholding.
In order to be able to exercise their voting rights at the Annual General
Meeting, shareholders who have registered their shares in the name of
an authorised agent must temporarily re-register their shares in their own
name in accordance with what follows from the notice to the Annual
General Meeting. Shareholders can be represented by agents. Minutes of
the Annual General Meeting are available for viewing on the company's
website, www.oem.se (see under The Company/Corporate Governance/
Annual General Meeting).
Shareholders who represented 67.3% of the share capital and 88.6%
of the voting rights took part in the 2019 Annual General Meeting held on
24 April 2019. Petter Stillström was appointed to chair the Annual General
Meeting. The annual report and the Auditors' Report were presented at the
Meeting. In connection therewith, the Chairman of the Board submitted
information about the work of the Board of Directors, and Ulf Barkman,
chairman of the Audit Committee, reported on the work of the Audit
Committee and its cooperation with the auditors. The auditor submitted
the Auditors' Report and an oral account of the work during the year. The
company's Managing Director and Chief Executive Officer, Jörgen Zahlin,
presented comments on the Group's operations, the 2018 financial year
and developments in the first quarter of 2019.
The 2019 Annual General Meeting decided:
The 2020 Annual General Meeting will be held on 22 April 2020 in Tranås.
Nomination Committee
At the Annual General Meeting held on 24 April 2019, it was decided that
the Nomination Committee shall comprise one representative from each
one of no less than three and no more than four of the company's largest
shareholders and the Chairman of the Board, unless he/she is a member
as a shareholder representative. If a shareholder does not exercise his/her
right to appoint a member, the next largest shareholder in terms of voting
rights is entitled to appoint a member in the Nomination Committee. The
names of the members and the names of the shareholders they represent
shall be published at least six months before the 2020 Annual General
Meeting and shall be based on the known number of votes immediately
before publication. The term of office of the Nomination Committee shall
run until a new Nomination Committee is appointed. The Chairman of the
Nomination Committee shall be the Chairman of the Board.
Should there be any significant changes in the company's ownership
structure after the appointment of the Nomination Committee, the composition
of the Nomination Committee shall also be changed in line with
the principles above. Shareholders who appointed a representative to be
a member of the Nomination Committee shall be entitled to dismiss such
a member and appoint a new one and also appoint a new representative if
the member appointed by the shareholder chooses to withdraw from the
Nomination Committee. Changes to the composition of the Nomination
Committee shall be published as soon as such changes are made. The
composition of the Nomination Committee was published on 21 October
2019. The composition of the Nomination Committee is available for
viewing on OEM's website, www.oem.se, under The company/Corporate
governance/Nomination committee.
The Nomination Committee shall prepare proposals for the following
items of business to be presented for resolution at the 2020 Annual General
Meeting:
The Nomination Committee shall discharge its duties as required by the Swedish Code of Corporate Governance and may, if necessary, take independent professional advice at the company's expense in the furtherance of its work. The Nomination Committee for the 2020 Annual General Meeting is composed of:
Ongoing dialogue is conducted within the Nomination Committee which held a minuted meeting where it acquainted itself with the assessment of the work of the Board of Directors during the past year and it discussed the composition of the Board of Directors. The Nomination Committee's proposals to the Annual General Meeting will be presented in the notice of the Annual General Meeting and on the company's website. The composition of the Nomination Committee above deviates from the regulations of the Code, which stipulate that the majority are members of the Board, that not more than one of the Board Members on the Committee may be dependent on large shareholders and that a Board Member should not be a Chairman of the Nomination Committee. It is deemed that it is reasonable for a company of this size to have a Nomination Committee that is represented by the largest shareholders and that these also serve as Board Members.
BOARD OF DIRECTORS
Composition of the Board of Directors
The Articles of Association require that the Board of Directors shall comprise not less than four and not more than seven members elected by the Annual General Meeting for the period until the end of the next Annual General Meeting. Since the 2019 Annual General Meeting, the Board has consisted of the following members, all of them elected by the Annual General Meeting: Petter Stillström (Chair), Ulf Barkman, Mattias Franzén, Richard Pantzar, Jörgen Rosengren, Agne Svenberg and Åsa Söderström Winberg. All Board Members are independent with regard to the company and the company's management. Board members Ulf Barkman, Jörgen Rosengren and Åsa Söderström Winberg are independent of the company and the company's management, and also independent of the company's major shareholders. Additional information about the members of the Board elected by the General Meeting is given in the section about the Board of Directors on page 36 in this Annual Report and on the company's website, under The Company/Corporate Governance/The Board. The Nomination Committee takes age, gender, education, professional background and other aspects of diversity into consideration when nominating candidates to fill Board vacancies. The composition of the Board should be appropriate for the company's business operations, stage of development and conditions in general, characterised by diversity and a breadth of skills, experience and backgrounds among its members. The above provides the Nomination Committee with a good basis on which to appraise whether the composition of the Board is satisfactory and whether the requirement for skills, breadth and experience has been met.
Chairman of the Board
It is the duty of the Chairman of the Board, Petter Stillström, who was
reelected at the 2019 Annual General Meeting, to ensure that the work
of the Board is conducted efficiently and that the Board discharges its
duties as required by the Swedish Companies Act, other legislation and
regulations, rules applicable to companies listed on the stock exchange
(including the Code) and the Board's internal governing instruments. It is
the Chairman's task to ensure that the Board continuously updates and
deepens its knowledge about the company and receives satisfactory data
and decision-making information for its work, to establish the agenda for
the meetings of the Board in consultation with the Managing Director, to
verify that the decisions of the Board are implemented and ensure that
the work of the Board is assessed annually. The Chairman of the Board
represents the company in ownership issues.
Duties of the Board
Each year, the Board establishes written rules of procedure that regulate
the Board's work and its mutual division of responsibilities, including its
committees, the decision-making procedure in the Board, the Board's
meeting procedure and the Chairman's duties. The Board has also issued
an instruction for the Managing Director, which regulates his duties and reporting
obligation to the Board of Directors. As necessary, the Board also
reviews and approves policies concerning the Group, such as the treasury
34 OEM 2019
policy. The Board monitors the work of the Managing Director
by regularly reviewing operations during the year. It is responsible for
purposefully structuring the organisation, and the procedures and guidelines
for the management of the company's business. It is also responsible
for ensuring that there is a satisfactory system of internal control. The
Board is also responsible for the development and follow-up of the
company's strategies, decisions concerning acquisition and sale of operations,
major investments, appointments and remuneration of the Managing
Director and other senior executives as stated in the guidelines adopted
by the Annual General Meeting. The Board of Directors and the Managing
Director present the annual report to the Annual General Meeting.
Work of the Board
In accordance with the adopted rules of procedure, the Board of Directors
holds at least six ordinary meetings per year plus an inaugural meeting
after the Annual General Meeting and whenever necessitated by the
situation.
During 2019, the Board had a total of seven meetings, including the
inaugural meeting.
The Board Members have participated in all Board meetings with the
exception of Agne Svenberg on one occasion. When the members were
unable to attend, they presented their opinions and views on the items of
business to the Chairman of the Board prior to the meeting. All resolutions
have been passed unanimously by the Board of Directors.
The secretary of the Board is the company's CFO. Other company
employees take part in the meetings of the Board in connection with the
presentation of specific issues or when otherwise deemed appropriate.
The work of the Board during the year has covered a range of matters,
including issues concerning the strategic development of the Group, operating
activities, the trend in earnings and profits, business combinations,
disposal of companies and properties, organisation, the Group's financial
position and funding of the Group's capital structure.
The work of the Board is subject to an annual assessment. This is
done by each Board member rating a number of relevant issues with the
opportunity to provide comments. The results are compiled and presented
to the Nomination Committee.
Remuneration of the Board
The remuneration of the members of the Board elected by the Annual
General Meeting is decided by the Meeting in accordance with the
proposal of the Nomination Committee. The 2019 Annual General Meeting
approved the proposal that fees of SEK 450,000 be paid to the Chairman
of the Board and SEK 225,000 to each of the Board members elected at
the Meeting, for the period until the 2020 Annual General Meeting. The
total remuneration of Board members, in accordance with the approval of
the Annual General Meeting, is thus SEK 1,800,000. The chairperson of the
Audit Committee will receive remuneration of SEK 50,000. No additional
remuneration has been paid to any Board Member.
Remuneration Committee
The Board has appointed a Remuneration Committee, which consists of
the Chair, Petter Stillström, and the Board member Agne Svenberg. The
Remuneration Committee prepares "the Board's proposals for policies
for senior executives' remuneration" and the application of these. The
proposal is discussed by the Board and is subsequently presented to
the Annual General Meeting for adoption. Based on the resolution of the
Annual General Meeting, the Board decides on the remuneration of the
Managing Director. Based on the proposal of the Managing Director, the
Remuneration Committee passes a resolution on the remuneration of
other members of the Group management. The Board is informed of the
decisions of the Remuneration Committee. Salaries and other terms of
appointment for Group management shall be set at competitive levels.
In addition to base salary, Group management may also receive variable
remuneration, which is capped at 58% of base salary, the equivalent of 7
monthly salaries. Compared with 2018, the level for variable pay in relation
to fixed pay is unchanged. Senior executives in the OEM Group shall have
market-competitive, premium-based pension schemes, capped at 30% of
fixed remuneration. The pension scheme level is the same as for 2018. All
share-related incentive schemes are to be decided by the Annual General
Meeting. At present, there are no similar incentive schemes. The maximum
term of notice is 24 months and shall also include the obligation to work
during the term of notice. The Remuneration Committee met once in the
year to review and approve the above policy proposals.
Guidelines for the remuneration of senior executives will be proposed
for approval and adoption at the 2020 Annual General Meeting and are
presented on page 31 of this report.
Audit Committee
During the year, the Board has had a special Audit Committee consisting
of Chairman Ulf Barkman and Petter Stillström.
The Audit Committee shall, without it otherwise affecting the Board's
responsibilities and duties, oversee the company's financial reporting and
the efficiency of the company's internal control activities and risk management
relating to the financial reporting, keep itself informed about the audit
of the Annual Report and the consolidated financial statements, examine
and monitor the objectivity and independence of the auditor and specifically
pre-approve any services that the auditor provides the company with
other than audit-related services. The Audit Committee evaluates the audit
work that has been carried out and informs the company's Nomination
Committee of the results of the evaluation and assists the Nomination
Committee in preparing proposals for auditors and remuneration of the
auditors' work.
The Audit Committee has convened on four occasions and has met with
an external auditor on three of them. The Board and the Audit Committee
have held a review meeting with and received a report from the company's
external auditor in connection with the Board meeting in February 2020 at
which the Board approved the annual financial statements. The auditors'
reports have not led to any specific measures by the Board or the Audit
Committee.
Managing Director and Group Executive Team
The Managing Director, Jörgen Zahlin, manages the operations in accordance
with the Swedish Companies Act, other acts and regulations, the
rules applicable to companies listed on the stock exchange, the Articles
of Association of the Company, the internal governing instruments of
the Board of Directors and the goals and strategies set by the Board.
The Managing Director prepares the necessary information and basis for
decisions prior to the Board meetings, in consultation with the Chairman
of the Board, presents the items and justifies proposals for resolutions.
The Managing Director leads the work of the Group's executive team and
makes decisions in consultation with the members of the executive team.
In 2019, the members were Jörgen Zahlin, Jan Cnattingius, Jens Kjellsson,
Urban Malm, Patrick Nyström and Björn Pettersson.
The Group management holds regular business reviews under the leadership
of the Managing Director. The Managing Director and members of
Group management are presented on page 37 of this Annual Report and
on the company's website (under The Company/Group Executive Team).
Auditors
As required by the Articles of Association, the company must have at least
one auditor appointed by the Annual General Meeting and, if the auditor
is not an auditing firm, it must also have a deputy auditor. The company's
auditors work according to an audit plan and report their observations
to company management teams, the Group's executive team, the Audit
Committee and the Board of Directors both during the course of the audit
and in connection with the adoption of the annual financial statements.
Internal procedures and control systems are continuously reviewed during
the year. A final review of the annual financial statements and the Annual
Report is carried out in January and February. A review is conducted in the
interim report for the third quarter. An account of the remuneration of the
auditors, including the fees for consulting services, is presented in Note 6.
The auditors are required to continually assess their independence before
OEM 2019 35
deciding whether to undertake an engagement to provide consulting
services.
An account of the audit is reported to the shareholders in the form of an
auditors' report and other opinions, which constitute a recommendation to
the shareholders on various items of business for resolution at the annual
general meeting. The Auditors' Report contains proposals for adoption of
the Income Statement and Balance Sheet for the Parent Company and
the Statement of Comprehensive Income and the Statement of Financial
Position for the Group, the appropriation of the company's profit and the
discharge of the members of the Board and the Managing Director from
liability.
The scope of the audit includes assessing compliance with the Articles
of Association, the Swedish Companies Act, the Swedish Annual Accounts
Act and International Financial Reporting Standards (IFRS), issues related
to measurement of items recognised in the Statement of Financial
Position/Balance Sheet for the Group/the Parent Company, and reviewing
significant accounting processes, governance arrangements and financial
control procedures.
The company's auditors meet with the Audit Committee three times a
year and once a year with the Board. The company's auditors also attend
the Annual General Meeting to explain and give opinions on the audit
work.
At the 2019 Annual General Meeting, Öhrlings PricewaterhouseCoopers
AB was appointed as the company's auditor until the conclusion of the
2020 Annual General Meeting. Martin Odqvist was appointed as the
principal auditor. Öhrlings PricewaterhouseCoopers AB performs the audit
of OEM International AB and most of the subsidiaries. Martin Odqvist's
other major clients include Balco Group, AB Fagerhult and Herenco
Holding.
Internal control and risk management
regarding financial reporting for the financial year 2019
As required by the Swedish Annual Accounts Act, the Board of Directors
must annually submit a presentation of the most important elements of the
company's system for internal control and risk management with regard to
its financial reporting. Pursuant to the Swedish Companies Act, the Board
of Directors is responsible for internal control. This responsibility includes
an annual assessment of the financial reporting submitted to the Board
and placement of requirements to its contents and presentation in order
to ensure the quality of the reporting. This requirement means that the
financial reporting must be fit for its purpose and appropriate and apply
the applicable accounting rules, acts and regulations and any other
requirements placed on listed companies. The Board of Directors is
responsible for ensuring that there is an adequate system for internal
control, which covers all essential risks of errors in financial reporting.
OEM's system for internal control comprises the control environment, risk
assessment, control activities, information, communication and follow-up.
Control environment
OEM builds and organises its operations on decentralised profit and
budget responsibilities. The basis for internal control in a decentralised
organisation is a firmly-established process, aimed at defining goals and
strategies for each organisation. Defined decision-making channels,
powers and responsibilities are communicated through internal
instructions and through guidelines and policies adopted by the Board
of Directors. These documents set out the division of responsibilities
and duties between the Board of Directors and the Managing Director
and within the operational activities. They also include a financial policy,
a manual for economic and financial reporting and instructions for each
closing of the books. A Group-wide reporting system is used for the
Group's year-end procedures.
Risk assessment
OEM has established procedures for handling risks that are deemed by
the Board and the company's management to be essential for the internal
control regarding financial reporting. The Group's exposure to a number of
different market and customer segments and the division of its operations
into some 30 companies ensures a significant spread of risk. The risk
assessment is carried out based on the Group's Statement of Financial
Position and Statement of Comprehensive Income in order to identify the
risk for significant errors. The greatest risks for the OEM Group as a whole
are related to intangible fixed assets, inventories and trade receivables.
Control activities
OEM has established a number of control activities based on risk assessments
that have been carried out. The activities are both preventive and
ascertaining and include transaction-related checks, such as rules regarding
authorisations and investments, and clear payment procedures, as well
as analytical checks performed by the Group's controller organisation and
central financial function. There are also various control activities related to
the management of the purchase, logistics and sales processes. Controllers
and financial managers on all levels in the Group have a key role with
regard to integrity, competence and ability to create the environment that
is required to achieve transparent and fair financial reporting. An important
overall control activity is the monthly performance follow-up, which is
carried out via the internal reporting system and which the Board of
Directors analyses and comments on as part of its internal work. This
involves comparing performance against set targets and previous results
and reviewing a number of key ratios. Each company in the Group has an
active Board where the majority of the companies have someone from
the Group's management team as chairperson. The Group management
makes regular visits to the subsidiaries that are subject to financial follow-
up.
Information, communication and follow-up
Internal information and external communications are regulated at an
overall level by an information policy and other guidelines.
Relevant steering documents and instructions are available on the
Group's intranet.
The Board of Directors receives comments from the Managing
Director concerning the state of the business and the development of the
operations on a monthly basis. The Board of Directors also deals with all
quarterly financial statements, as well as the annual report prior to their
publication. The financial situation is discussed at each Board meeting.
The members of the Board then have an opportunity to pose questions to
the company's management.
The company's auditors attend Audit Committee meetings three times a
year and Board meetings once a year and present their observations of the
company's internal procedures and control systems. The members of the
Board then have an opportunity to pose questions. Every year, the Board
takes a position on significant risk areas and assesses the internal control.
Furthermore, OEM's management continuously assesses the internal
control regarding financial reporting, above all, through own analysis, by
asking questions and taking part in the work of the control function.
Internal audit
The company and the Group have a relatively simple legal and operating
structure and working steering and internal control systems. The Board
continuously follows up the different Group companies' assessments of
internal control, among other things, through contacts with the company's
auditors. Against the backdrop of this, the Board has chosen not to have a
special internal audit.
