Annual Report 2007 - Corporate GovernanceCorporate Governance Report
Introduction
TeliaSonera has in the opinion of the Board of Directors followed the Swedish Code of Corporate Governance during 2007.
The corporate governance report, including the description of internal controls, does not form part of the official annual report and has not been audited.
TeliaSonera's corporate governance model
TeliaSonera's corporate governance model is designed to ensure that operative results correspond to decisions made, and is structured to encourage all employees to strive, within set boundaries, towards the same goals, with a common clear understanding of direction, shared values, roles, responsibilities and authority to act.
The Shareholders' meeting
The Shareholders' Meeting is the company's highest decision-making forum. Among other issues, the Shareholders' Meeting elects the members of the Board of Directors.
The Board of Directors
The Board of Directors is responsible for the governance, choice of strategic direction as well as substance of external communication of the Group. In that role the board makes decisions on i.a.:
- Appointment and dismissal of the CEO
- The overall organization of the Group
- The delegation of authority within the Group
- The internal control and risk management system of the Group
- Guidelines and instructions for the management
- The strategic direction and key strategic initiatives of the Group
- The core content of the Group's external communication
The CEO
The CEO is responsible for the company's business development and leads and coordinates the day-to-day operations in accordance with the guidelines and instructions of the Board of Directors.
Group-wide governance framework
The Group-wide governance framework comprises common direction and shared values, the management model and delegation of obligations and authority as well as the policies issued by Group functions. The Board of Directors approves the more important documents within the Group-wide governance framework, including certain policies issued by Group functions.
In order to provide a general guidance to all employees in the Group the following documents have been issued.
- Common direction and shared values
- In order to provide a general guidance to all employees in the Group the following documents have been issued. - Business concept
- Our business concept defines what services TeliaSonera provides and where. - Vision
- Our vision, "Simplicity makes everything possible," is what we want to achieve by 2010. - Shared values
- Our shared values, "Add value," "Show respect" and "Make it happen," focus on the behavior we want to promote. - Code of ethics
- Our code of ethics sets out the ethical standards within which we act. - Corporate strategy
- Our corporate strategy sets out the general direction of the Group.
Management model
The management model describes
- The governance system
- The organization
- The roles and responsibilities within the organization
- Business planning and reporting
Delegation of obligations and authority
- Delegation of obligations and authority
- Defines the obligations imposed on the heads of business areas and corporate functions and within which limits they may make decisions. - Business targets
- Describes yearly targets for the Group as a whole and for each business area and is directed to the heads of business areas and corporate functions. - CEO's decisions system
- Sets out how decisions by the CEO are made in individual cases.
Policies issued by Group functions
- The heads of Group functions may issue policies within their area of responsibility.
Business area-wide governance framework
The business area-wide governance framework shall be set within the boundaries of the Group wide framework. The business concept, vision, shared values and code of ethics are common for the entire Group as well as the common business planning process and reporting.
Head office
The corporate head office assists the CEO in setting the framework for the activities of the business areas and provides the head office and the business areas with certain support functions.
Shareholders' General Meeting
TeliaSonera is a Swedish, public, limited liability company and is governed by the Swedish Companies Act and the company's Articles of Association. According to the Companies Act, the Shareholders' General Meeting is the company's highest decision-making forum where the owners exercise their shareholder power.
The TeliaSonera share is listed on the Stockholm and the Helsinki Stock Exchanges. TeliaSonera has only one type of shares. Each TeliaSonera share represents one vote at the General Meeting of Shareholders. TeliaSonera had 655,247 shareholders at year-end 2007.
The company announced in the Interim Report January-September 2007 that the Annual General Meeting (AGM) will be held on March 31, 2008, in Stockholm.
Information about the shareholders' rights to have an issue addressed at the General Meeting and the deadline for when such a request must have been received by the company to ensure that it is included in the notice of the ordinary AGM can be found on the company's website.
Shareholders had the opportunity to register for the AGM 2007 in several ways, for example via the company's website.
The AGM 2007 was held on April 24, 2007, in Stockholm. A shareholders' information meeting was held in Helsinki the following day, which was attended by the company's management and parts of the Board.
The entire Board of Directors, all members from the Executive Management and the chief auditor attended the AGM 2007. After nomination by the Nomination Committee, attorney Sven Unger was elected chairman of the AGM 2007. Magnus Landare, representing Alecta Pensionsförsäkring, and Helena Levander, representing Tredje AP-fonden, were appointed to approve the minutes. None of them were members of the Board or employees in the company.
The AGM was held in Swedish and simultaneously interpreted into Finnish and English due to the company's international ownership. Material for the meeting was available in Swedish, Finnish and English. TeliaSonera also provided shareholders who could not attend the AGM the possibility to follow the meeting via the Internet. The shareholders attending the AGM were given the opportunity to ask questions, comment and make proposals for decisions. The minutes from the meeting are available on the company's web site in Swedish, Finnish and English.
A remuneration policy stating the principles for remuneration to the Executive Management was presented and approved at the meeting.
Nomination Committee
After the AGM 2007, TeliaSonera's Nomination Committee consists of the company's four largest shareholders at the time of the notice of the AGM and the Chairman of the Board. The AGM decided that the Nomination Committee should consist of Jonas Iversen, Chairman (the Swedish State), Markku Tapio (the Finnish State), KG Lindvall (Swedbank Robur Funds), Lennart Ribohn (SEB Funds) and the Chairman of the Board Tom von Weymarn. Within the scope of its instructions, the Swedish State has in November 2007 replaced its representative in the committee with Viktoria Aastrup. Information about the Nomination Committee's composition and changes to the composition have been made public as they occurred.
The Nomination Committee shall in accordance with its instruction
- nominate the Chairman and other members of the Board,
- propose the Board remuneration that is divided among the Chairman and other members and remuneration for serving on committees,
- nominate the Chairman of the AGM and
- nominate the auditors.
The Nomination Committee has reported to the company that the Committee is following the Code's guidelines and that it intends to report its activities at the AGM and on the company's website.
Shareholders are welcome to send nomination proposals to the Nomination Committee. Proposals can be sent by e-mail to "forslagtillstyrelseledamot@teliasonera.com". The Nomination Committee's proposals shall in accordance with the instruction be made public at the latest in connection with the notice of the AGM.
External auditors
PricewaterhouseCoopers AB was appointed auditor at the AGM 2004 and Göran Tidström (born 1946) is the auditor in charge.
PricewaterhouseCoopers AB is often engaged by the company's largest shareholder, the Swedish State, for both audit and advisory services. Current audit assignments include Svenska Spel and Samhall.
Göran Tidström is also an auditor of Meda, Securitas, Trelleborg and Volvo. He is the Chairman of the Board of PricewaterhouseCoopers AB, the Nordic audit profession's Board representative in International Federation of Accountants, IFAC, and Chairman of the Board of the European Financial Reporting Advisory Group, EFRAG.
Board of Directors
As of the AGM 2007, TeliaSonera's Board of Directors consists of seven members elected by the AGM, serving one-year terms, and three employee representatives from the Swedish operations. An additional Finnish employee representative is present at Board meetings, but without voting rights. The AGM 2007 elected Tom von Weymarn to serve as Chairman of the Board.
Board of Directors Remuneration during the Year, AttendanceClick to view table| Presence | Total Remuneration | No of shares | |||||
| Name | Elected | Position | Committee | Board Meetings | Committee Meetings | and Benefits (SEK) | in TeliaSonera |
|---|---|---|---|---|---|---|---|
| Tom von Weymarn | 2002 | Chairman of the Board and Chairman of the Remuneration Committee | Remuneration | 100% | 100% | 940,012 | 15,316 |
| Maija-Liisa Friman | 2007 | Director | 77% | 383,174 | 5,5971) | ||
| Conny Karlsson | 2007 | Director | Audit | 92% | 83% | 474,848 | 10,000 |
| Lars G Nordström | 2007 | Director | Remuneration | 92% | 100% | 401,511 | 4,000 |
| Timo Peltola | 2004 | Director | Remuneration | 100% | 100% | 420,012 | 3,000 |
| Jon Risfelt | 2007 | Director | Audit | 100% | 100% | 452,035 | 2,000 |
| Caroline Sundewall | 2001 | Director and Chairman of the Audit Committee | Audit | 100% | 100% | 550,008 | 4,0001) |
| Agneta Ahlström | 2007 | Employee Representative | 100% | 200 | |||
| Elof Isaksson | 2000 | Employee Representative | 100% | 1,7501) | |||
| Yvonne Gustafsson2) | 2002 | Employee Representative | 40% | 175 | |||
| Arja Kovin2) | 2007 | Employee Representative | 100% | 0 | |||
| Berith Westman | 1993 | Employee Representative | 77% | 1,000 | |||
See also Note 32 to the consolidated financial statements and Report of Directors (Remuneration to Management)
1) Including shareholdings by spouse and/or affiliated persons.
2) Yvonne Gustafsson, formerly Karlsson, was in April 2007 replaced by Arja Kovin, who in turn was replaced by Agneta Ahlström in December 2007.
The members elected by the AGM are considered to be independent in relation to the company and the shareholders.
The guidelines for the work of the Board of Directors are set down in standing orders. The standing orders contain rules regarding the number of ordinary board meetings, the agenda items for ordinary board meetings, responsibilities within the Board, including the tasks of the Chairman of the Board, the division of responsibilities between the Board and the CEO and how work is to be carried out in committees.
To improve the efficiency of board work, the Board has appointed a Remuneration Committee and an Audit Committee.
The Remuneration Committee handles issues regarding salary and other remuneration to the CEO and Executive Management and incentive programs that target a broader group of employees.
The Audit Committee reviews the company's external financial reporting, internal financial reporting processes and the environment of internal control over financial reporting.
The Board of Directors' committees prepare decisions for the Board. The Remuneration Committee has the authority to approve remuneration to persons who report directly to the CEO. The Audit Committee - and in some cases its chairman - has the right to make decisions regarding the purchase of services from the company's auditors within the framework decided by the Board.
TeliaSonera's General Counsel Jan Henrik Ahrnell served as secretary at the Board's and its committees' meetings.
Work of the Board of Directors during 2007
The Board of Directors held nine ordinary meetings during 2007 as well as four extra meetings.
In addition to following up on the day-to-day business of the Group, the Board of Directors paid special attention to:
- Value-creating strategic options
- Target definition for the operations
- Investments in Eurasia, including Russia and Turkey
- Internal control over financial reporting
- Restructuring of the Group's organization
- Capital structure
- Company acquisitions
- Remuneration issues
The Board of Directors applied a systematic and structured evaluation to its internal work, also with the assistance of external consultants - Active Owner Partners AB. The result of this evaluation was reported to the Nomination Committee.
Remuneration structure in TeliaSonera
According to the remuneration policy established by the AGM, TeliaSonera shall offer a competitive package of rewards and remuneration to executives, managers and employees without being market leader in this area.
The salary consists of a base part and a variable part. The base salary follows the salary structure in each respective country while the objectives of the variable salary are established in a plan for each calendar year and are based on the Group's financial performance, the business unit's financial performance and individual performance objectives. The level of the variable salary varies depending on the employee's position in the company.
There are currently no share or share price-related incentive programs at TeliaSonera.
The Board of Directors determines the base salary and other remuneration for the CEO. The Remuneration Committee approves, after proposals from the CEO, base salaries and other remuneration to those persons who report directly to the CEO.
Lars Nyberg, TeliaSonera's CEO as of September 2007, had an annual base salary of SEK 8,000,000. The CEO's variable salary may be a maximum of 50 percent of the base salary. Anders Igel, who was TeliaSonera's CEO until July 31, 2007, had an annual base salary of SEK 7,087,100.
Internal control over financial reporting
The Board of Directors is according to the Swedish Companies Act and the Swedish Code of corporate governance responsible for the internal control. The description below is limited to internal control over financial reporting.
Internal control over financial reporting is an integral part of TeliaSonera's corporate governance. It includes methods and procedures to safeguard the Group's assets, ensure and control the reliability and correctness of financial reporting in accordance with applicable legislation and guidelines, improve operational efficiency and control the level of risk in the business operations.
According to company policy adopted by the Board of Directors, the financial reporting of TeliaSonera shall be in line with high professional standards and be full, fair, accurate, punctual and understandable. TeliaSonera's policy for internal control over financial reporting is based on the international COSO internal control framework.
The Board of Directors strives for a sufficient internal control environment within the Group. This environment should be stable and independent of external control requirements. For example, TeliaSonera's deregistration from the U.S. Securities and Exchange Commission in June 2007 did not change the Board's target for the internal control environment.
Control environment
In 2007, management has updated the company's Code of ethics. The purpose of the code is, among other things, to further promote honest and ethical conduct, clear communication, compliance with applicable governmental rules, the prompt internal reporting of violations of the code, and accountability for adherence to the code.
The rapid changes in the market require a flexible planning system. Planning and follow-up are conducted in rolling seven-quarter plans. The CEO sets goals for the operations based on the guidelines of the Board of Directors. To ensure performance, managers have targets for their particular operations.
Each unit of operations has a controller responsible for ensuring that the monthly and quarterly financial reporting follows policies and that the reports are delivered on time, sufficient internal controls exist and are performed, required reconciliations are properly done and larger business and financial risks are identified and reported.
TeliaSonera has a common system for all large wholly owned units of operation for standardized control and reporting. TeliaSonera has also established a financial shared services unit that takes care of the standardized financial accounting processes across all large wholly owned units.
Risk management
Risk management is an integral part of the Group's business control and monitoring. Risks that may pose a threat to achieving business objectives are identified, and measures to control these risks are introduced. A process exists to regularly identify risks that could lead to material misstatements of financial information.
The Group's security unit works with preventive security measures and crisis management to protect the Group's assets, IT systems, personnel and to safeguard telecom networks, services and customers from infringements and fraud. The Group's insurance coverage is managed by central guidelines.
Control activities
To mitigate risks, TeliaSonera performs control activities, both automated and manual, to ensure that necessary actions are taken to either prevent or detect material misstatements and to safeguard the assets of the company.
Processes are described in a common and structured way, and key controls that are critical in mitigating the financial reporting risks are identified and documented. During 2007, selected testing activities were performed to assure that these key controls are functioning as intended. Remediation activities were taken to correct or improve controls where such activities were necessary. Testing activities for 2007 were performed by the Group's internal audit function, on behalf of management.
Monitoring of control activities
The Board of Directors actively monitors the environment of internal control over financial reporting, specifically through the Audit Committee.
The Board of Directors receives monthly financial reports from the CEO. The Board of Directors and its Audit Committee go through all external financial reports before they are made public. The Audit Committee receives direct reports from the external and internal auditors and discusses and follows up their viewpoints. Both the external and internal auditors are represented at the meetings of the committee. At least once a year, the entire Board of Directors meets with the external auditors, in part without the presence of management.
The Board of Directors receives regularly risk reports compiled by management. Every year, the Audit Committee also meets and discusses with responsible persons from TeliaSonera's risk management, business control, corporate finance and treasury, legal department, tax department, and representatives for the control of the financial reporting from the business areas. The purpose of these meetings is to increase the Board's understanding of major issues related to TeliaSonera's risk management and controls. The Audit Committee addresses, among other issues, internal control environment, impairment valuations, interpretations of accounting principles of special importance for the Group, legal matters that could have a significant impact on the financial statements and evaluation of the auditors' performance.
TeliaSonera also has an internal disclosure committee that reports to the CEO and CFO and that exercises additional control over TeliaSonera's responsibilities regarding external financial reporting. This committee includes responsible persons from corporate control, internal audit, legal department, corporate finance and treasury, risk management, tax department and investor relations.
TeliaSonera has implemented a structured monitoring process, systematic testing activities of key controls, and periodic monitoring on the performance of internal controls at both the business area and the Group level. At the Group level meetings regarding the monitoring of internal controls are chaired by the CFO and all finance officers responsible for the business areas participate as well as the responsible persons from corporate control, internal audit, legal department, IT units and risk management. The Group level meetings are also attended by the external auditors. The CFO regularly reports to the Audit Committee on the monitoring of internal controls. Both the Audit Committee and the Board of Directors have reviewed and discussed management's assessment of the company's internal controls, and have actively followed up the related improvement measures by management.
Internal audit
The Group has an internal audit function that reviews the Group's operations and makes proposals with a view to improve internal controls, streamline processes and increase efficiency. In addition, the internal audit function has in 2007 tested and evaluated key controls over financial reporting, on behalf of management. The head of corporate internal audit reports to the CEO, who decides in consultation with the Audit Committee on the function's tasks and priorities. The internal audit's tasks and priorities as well as findings are reported to and discussed on a regular basis at the Audit Committee meetings.