Corporate Governance.

Corporate governance review 2016

1. Implementation and reporting on corporate governance

Techstep ASA’s principles for good corporate governance establish the foundation for long-term value creation to the benefit of the owners, employees, other stakeholders and society as a whole. The principles should contribute to instilling confidence in the Company, more effective decision-making and improving communication between the management, Board of Directors and the Company’s shareholders. The principles cannot replace the ongoing work to promote a healthy corporate culture throughout the Company, but they must be seen in the context of this work. Confidence in Techstep is based on respect, responsibility and equality, both internally and externally.

As a Norwegian public limited company listed on Oslo Børs, Techstep is subject to the requirement to prepare an annual statement of its principles and practices for corporate governance pursuant to Section 3-3b of the Norwegian Accounting Act and Section 7 of Oslo Børs’ “Continuing Obligations of Stock Exchange Listed Companies” The Norwegian Corporate Governance Board (NUES) has established the Norwegian Code of Practice for Corporate Governance (“the Code of Practice”). Techstep observes the current Code of Practice, most recently revised on 30 October 2014. The Code of Practice is available at www.nues.no.

Compliance with the Code of Practice takes place based on the principle of “comply or explain”, which means that the Company must either comply with the individual items in the Code of Practice, or explain why they have chosen an alternative solution.

Techstep provides an annual overall statement of its corporate governance principles in its annual report, which is published on the Company’s website www.techstepasa.no. The statement discusses how Techstep has complied with the Code of Practice throughout the year.

Status at the turn of the year 2016/2017

In 2016, Techstep underwent significant changes with respect to its business operations, ownership, strategy, organization, management and Board of Directors. For supplementary information, reference is made to the Board of Directors’ Report and stock exchange notices for 2016. These changes affect the Company’s principles and implementation of corporate governance, including the need to prepare new guidelines and instructions. According to the Company’s own assessment, Techstep deviates from four sections of the Code of Practice at the turn of the year 2016/2017:

  • Clarification of core values and formulation of guidelines for ethics and corporate social responsibility (Section)
  • Formulation of the rules of procedure for the Nomination Committee (Section 7)
  • Formulation of company takeover policy (Section 14)
  • Formulation of guidelines for use of the auditor for services other than auditing (Section 15)

The Board of Directors and management will take 2017 to revise and formulate the necessary rules of procedure, guidelines and routines, including clarification of Techstep’s core values and guidelines for ethics and corporate social responsibility.

2. Business

Techstep’s purpose is defined in Article 3 of its Articles of Association:

“The Company’s purpose is to engage in business operations within information and communication technology, develop and provide solutions and software within the mobility, digitalization as well as consultancy business and everything that belongs thereto, including owning shares and other securities in other companies.”

Techstep has developed clear goals and strategies for the Group and expressed ambitions to become a leading supplier of the digital workplace and mobility for employees in the Nordic region. The Company’s goals and main strategies are discussed further in the annual report for 2016.

3. Equity and dividends

Techstep’s equity as of 31 December 2016 was NOK 260.3 million, which corresponds to an equity ratio of 51.2 percent. The Board of Directors considers the equity ratio to be satisfactory and in accordance with the Company’s goals, strategy and risk profile.

Techstep has not established any dividend policy beyond a general consensus that the Company’s goals and focus are to increase shareholder value and contribute to an attractive market for the Company’s shares. As of today, Techstep has not distributed any dividend on the Company’s shares, and it does not expect to pay any dividend for the Company in the coming years. Techstep’s intention is to retain future earnings, if any, to finance operations and expand the business. Any future decision to pay a dividend will depend on the Company’s financial position, operating profit and capital requirements.

As of 31 December 2016, there are three authorizations for the Board of Directors:

  • Authorization to acquire treasury shares, limited to a maximum of NOK 10,247,557.
  • Authorization to increase the Company’s share capital #1 by a maximum of NOK 25,600,000 by issuing a maximum of 25.6 million shares in Techstep, with a nominal value of NOK 1 per share. The authorization encompasses the issuance of shares in connection with a merger.
  • Authorization to increase the Company’s share capital #2 by a maximum of NOK 7,500,000 by issuing a maximum of 7.5 million shares in Techstep, with a nominal value of NOK 1 per share, in connection with the acquisition of shares in Teki Solutions AS.

For supplementary information on the authorizations, reference is made to the minutes of the Extraordinary General Meeting held on 4 November 2016, which is available at www.techstepasa.no and www.newsweb.no. These authorizations are valid until Techstep’s Annual General Meeting in 2017, and no later than 30 June 2017. There was a separate vote on each of the three authorizations.

4. Equal treatment of shareholders and transactions with related parties

Techstep ASA has one class of shares. All shares enjoy equal rights in the Company, and the Company’s Articles of Association contain no restrictions on exercising voting rights. Treasury shares will be traded on the stock exchange or in accordance with guidelines from Oslo Børs.

In the event of any capital increase based on the authorization from the General Meeting where the pre-emptive rights of shareholders are set aside, grounds for this will be provided in the stock exchange notice together with the capital increase. In March 2016, a private offering was made to provide the Company with working capital and ensure long-term strategic ownership, with a subsequent repair issue to ensure the equal treatment of shareholders. For details, see the notice for the Extraordinary General Meeting, dated 8 January 2016, and the stock exchange notice of 9 March 2016. In addition, consideration shares were issued in 2016 as settlement for the acquisition of Zono AS and Teki Solutions AS, for which the pre-emptive rights of the shareholders were set aside. For details, see the minutes of the Extraordinary General Meetings of 23 August and 2 November 2016, respectively.

Techstep has a sensible attitude towards transactions with shareholders, board members, employees and other related parties. To ensure that such situations are handled in the best possible manner, the Board of Directors urges the use of transparency and good judgment in any transaction where both the Company and a board member or a party related to a board member may have interests.

For significant transactions with closely related parties, the Company will use valuations and statements from an independent third party if the transaction is not to be considered by the General Meeting. In 2016, transactions connected to principal shareholders of Techstep ASA were carried out, including Zono AS and Teki Solutions. In both cases, an independent valuation by an expert third party was carried out. For further information, see the stock exchange notices with notices of the Extraordinary General Meetings in 2016, dated 2 August and 13 October, as well as Note 22 “Transactions with related parties” attached to the annual financial statements in the annual report for 2016.

5. Freely negotiable shares

The Company’s shares are freely negotiable on Oslo Børs, and the Company’s Articles of Association do not place any restrictions on the negotiability of shares. Moreover, there are no restrictions on the purchase or sale of shares of stock by board members and persons in Company management, provided that the rules on insider trading are observed.

6. General Meetings

The General Meeting is the Company’s highest decision-making body in which shareholders can exercise their influence. The General Meeting is open to everyone, and Techstep encourages all shareholders to participate and exercise their rights in connection with the Company’s General Meetings. In order to vote for their shares, the shareholder must be registered with the Norwegian Central Securities Depository (VPS) at the time of the General Meeting.

Notices of annual or extraordinary general meetings shall be sent no later than 21 days prior to the date of the General Meeting. In accordance with the Company’s Articles of Association, documents that are to be considered by the General Meeting are not required to be sent to the shareholders if they have been made available on the Company website. The same applies to documents that by law are to be included in or attached to the notice of the General Meeting. A shareholder may nonetheless request that relevant documents concerning business to be transacted at the General Meeting be sent to him or her. The deadline for registration will be set as close to the meeting as possible, and all the necessary registration information will be described in the notice.

Shareholders who are unable to attend may vote by proxy. Whenever possible, the Company will prepare a proxy form that will allow separate votes for the items that are to be considered at the General Meeting. The Board Chairman is normally the chairperson for the General Meeting. If there is disagreement on individual items, for which the Board Chairman belongs to one of the factions, or is not regarded as being impartial for other reasons, another chairperson will be appointed to ensure impartiality regarding the items to be considered.

The Company will publish the minutes of the General Meeting in accordance with the Stock Exchange Regulations.

In 2016, Techstep held its Annual General Meeting on 28 April, and three Extraordinary General Meetings were held on 31 March, 23 August, and 4 November, respectively.

7. Nomination Committee

In accordance with Article 6 of the Company’s Articles of Association, Techstep shall have a Nomination Committee consisting of two to three members. The Nomination Committee is elected by the General Meeting, and the members are elected for a term of two years. Remuneration of the members of the Nomination Committee is determined by the General Meeting based on a proposal by the Board of Directors.

As of 31 December 2016, the Nomination Committee consists of two persons, Harald Arnet (Chair) and Ketil Skorstad. Both were elected at the Extraordinary General Meeting of 4 November 2016.

The duties of the Nomination Committee include nominating candidates for the Board of Directors and the Nomination Committee, as well as proposing the remuneration of board members. Grounds shall be provided for nominations by the Nomination Committee when they are presented to the General Meeting. The nomination shall be attached to the notice of the General Meeting, no later than 21 days prior to the date of the General Meeting.

8. Board of Directors, composition and Independence

In accordance with Article 5 of the Articles of Association, the Company’s Board of Directors shall consist of 3-7 members that are elected by the General Meeting. The Chairman of the Board is elected by the General Meeting, while the Board of Directors elects its own Deputy Chairman. As of 31 December 2016, the Company’s Board of Directors consists of seven members, three of whom are women: Einar J. Greve (Chairman), Ingrid Leisner, Svein Ove Brekke, Kristian Lundkvist, Stein Erik Moe, Kristin Hellebust and Camilla Magnus. All the board members were elected at the Extraordinary General Meeting of 4 November 2016. The term of office is for a period of two years, and the members may be re-elected.

The composition of the Board of Directors is based on a broad representation of the Company’s shareholders, as well as the Company’s need for competence, capacity and balanced decisions. A summary of the competence and background of the individual board members is available on the Company’s website www.techstepasa.no.

All board members are regarded as independent in relation to the Company’s day-to-day management, and in relation to important business associates. Five of the board members are regarded as independent of the Company’s principal shareholders: Einar J. Greve, Stein Erik Moe, Ingrid Leisner, Kristin Hellebust and Camilla Magnus. A summary of the shares of stock held in the Company by the various board members is available in Note 7 to the annual report for 2016.

9. Work of the Board of Directors

The Board of Directors has the ultimate responsibility for overseeing and supervising the Company’s management and operations. The work of the Board is based on the rules of procedure for the Board of Directors, adopted on 24 November 2016, which describe the responsibilities, duties and administrative procedures of the Board of Directors, and regulate the distribution of duties between the Board Chairman and CEO. The rules of procedure also regulate work related to the board committees, including the Audit Committee and the Compensation Committee.

The Board of Directors is responsible for determining the Company’s overall goal and strategic direction, principles, risk management and financial reporting. The Board of Directors is also responsible for ensuring that the Company has competent management with a clear internal distribution of responsibilities and work, as well as for making an ongoing evaluation of the performance of the CEO. Rules of procedure for the CEO, which clarify duties, authorities and responsibilities, have also been prepared.

The Board of Directors meets as often as necessary to fulfill its duties, and a minimum of seven times each financial year. The current Board of Directors held two board meetings in 2016 after it was installed on 2 November 2016.

The Board of Directors will undertake an annual evaluation of its work and competence, and report this to the Nomination Committee.

Board Committees

The Board of Directors has appointed an Audit Committee, and its main duties are to assess the Company’s financial reporting and systems for internal control, to follow up and evaluate the auditor, ensure that the auditor is independent, and assist the Nomination Committee with a proposal for the election and remuneration of the auditor. As of December 31, 2016, the Audit Committee consisted of two members from the Board, Ingrid Leisner and Camilla Magnus, both of whom are regarded as independent of the Company.

The Board of Directors has also appointed a Compensation Committee, which is to assist the Board of Directors with tasks related to the evaluation and determination of remuneration for the CEO, as well as the formulation of policy for the remuneration of executive personnel. As of 31 December 2016, the Compensation Committee consisted of two members from the Board, Board Chairman Einar J. Greve and Kristian Lundkvist.

10. Risk management and internal Control

The Board of Directors of Techstep are responsible for ensuring that the Company has good risk management and internal control in accordance with the regulations that apply to its business activities. The Company’s systems and procedures connected to risk management and internal control shall ensure efficient operations, timely and correct financial reporting, and compliance with the laws and regulations to which the Company is subject. Specific goals for the Company’s internal control are prepared, and they will be revised annually by the corporate management of Techstep. In addition, the Audit Committee has an annual meeting with the auditor, at which the Company’s internal control routines are reviewed and evaluated.

Techstep prepares its accounts in accordance with the international accounting standard IFRS, which aims to provide a true and fair overview of the Company’s assets, financial obligations, financial position and operating profit. The Board of Directors receives monthly reports from the management on developments and results related to strategy, finance, CPIs, risk management, projects, challenges and plans for coming periods. In addition, quarterly reports are prepared in accordance with the listing requirements of Oslo Børs, and they are reviewed by the Audit Committee prior to the board meeting and subsequent publication.

For information related to the Company’s identified risk and risk management, reference is made to the Board of Directors’ Report and Note 2b in the annual report for 2016.

11. Remuneration of the Board of Directors

Remuneration of board members is stipulated annually by the General Meeting based on a recommendation from the Nomination Committee. Remuneration should reflect the Board of Directors’ responsibilities, competence, time involved and the complexity of the business.

The remuneration of the Board of Directors is not performance-based and does not contain option elements. Board members who participate in the Audit Committee receive separate compensation for this. The Company does not provide loans to board members. Detailed information on the remuneration of the Board of Directors can be found in Note 7 to the accounts in the annual report for 2016.

12. Remuneration of executive personnel

Techstep’s executive remuneration policy is based on the primary principle that executive remuneration should be competitive and motivating in order to attract and retain key persons with the necessary competence. The Executive Compensation Statement and guidelines for remuneration of Company management, including criteria for performance-based remuneration, will be presented as separate items at the General Meeting. A clarification will be made of which guidelines are advisory for the Board of Directors, and which guidelines may be binding. In addition, a proposal has been made to allocate options to the management group, subject to the approval of the Annual General Meeting. Detailed information on the remuneration of executive personnel can be found in Note 7 to the accounts in the annual report for 2016.

13. Information and Communications

Techstep places high priority on communication with shareholders, investors and analysts in order to ensure the most correct valuation possible of the Company in the financial market. The Board of Directors will seek to give market actors correct, clear, relevant and up-to-date information, while observing the requirement of equal treatment. All information is primarily provided in English, and all stock exchange notices will be made available at www.newsweb.no and the Company’s website www.techstepasa.no.

The CEO is responsible for both day-to-day communication with investors and for shareholder relations, while the Board Chairman is responsible for management of expectations related to strategic direction and risk, as well as topics that require resolution by the General Meeting.

Techstep will continue its quarterly reporting in accordance with the recommendation of Oslo Børs, and the interim results will be published no later than 60 days after the end of the quarter. The complete annual financial statements, including the Board of Directors’ Report, will be made available no later than three weeks prior to the General Meeting, and no later than the end of April every year.

Starting in 2017, Techstep will give presentations in connection with the Company’s interim reports. The presentations will be open to everyone and provide an overview of the operational and financial developments for the quarter that ended, in addition to an overview of the market outlook and the Company’s future prospects. The presentations will be made available on the Company’s website www.techstepasa.no.

Techstep will publish an annual financial calendar, which will contain the dates for the publication of the Company’s interim results, as well as the date of the Annual General Meeting. The calendar will be made available on the Company’s website www.techstepasa.no, and it will be distributed as a stock exchange notice and updated on the website of Oslo Børs www.newsweb.no. The calendar will be published prior to 31 December every year.

14. Takeovers

The Board of Directors of Techstep has not established any guiding principles for how it should act in the event of a takeover bid. If such a situation should arise, the Board of Directors will evaluate the relevant recommendations from the Norwegian Corporate Governance Board (NUES), and it will seek to follow these if the situation so permits.

15.Auditor

The Company’s auditor, BDO AS, has been appointed by the General Meeting, and the auditor is regarded as independent in relation to Techstep ASA. The Board of Directors receives an annual confirmation from the auditor that the requirements regarding independence and objectivity have been satisfied.

The auditor prepares an annual plan for carrying out the auditing work, which is made known to the Audit Committee and the Board of Directors. The Board of Directors will have semi-annual meetings with the auditor; one in the autumn to discuss preparations for the annual financial statements and the Company’s audit, and one in the spring in connection with consideration of the annual financial statements and review of the Company’s internal control and other findings. These meetings will also be held with an opportunity for a review with the auditor, without the Company’s day-to-day management being present. No separate guidelines have been prepared for use of the auditor for services other than auditing.

The Board of Directors will disclose the remuneration of the auditor, distributed between auditing and other services, to the Annual General Meeting, where the remuneration will be determined. The auditor will participate in the Annual General Meeting.