Corporate Governance Policy
as resolved by the Board of Directors on 11 April 2012
Introduction to the Corporate Governance policy
Sevan Drilling is committed to sound corporate governance principles and thereby contribute to optimal value creation over time. The objective of corporate governance is to regulate the division of roles between shareholders, the Board and executive management more comprehensively than is required by legislation.
1. IMPLEMENTATION AND REPORTING ON CORPORATE GOVERNANCE
Implementation and regulations
Sevan Drilling ASA’s (“Sevan Drilling” or “the company”) Board of Directors (the “Board”) has the ultimate responsibility for ensuring that the company practices good corporate governance and has prepared and approved the company’s policy for corporate governance. The company, through its Board and executive management, carries out an annual review of its principles for corporate governance.
Sevan Drilling is a Norwegian public limited company listed on Oslo Børs. The Norwegian Accounting Act includes provisions on corporate governance at Section 3-3b which impose a duty on the company to issue an annual statement on its principles and practice for corporate governance. These provisions also stipulate minimum requirements for the content of this report.
The Norwegian Corporate Governance Board (NCGB) has issued the Norwegian Code of Practice for Corporate Governance (the “Code”). Adherence to the Code is based on the “comply or explain” principle, which means that a company must comply with the recommendations of the Code or explain why it has chosen an alternative approach to specific recommendations.
Oslo Børs requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code in force at the time. The Continuing Obligations of listed companies are available on www.oslobors.no.
Sevan Drilling complies with the above mentioned rules and regulations, and the current Code, issued on 21 October 2010 and amended on 20 October 2011, unless otherwise specifically stated. The company provides a statement on its principles for corporate governance in its annual report, and this information is also available on the company website, www.sevandrilling.com.
Values, objectives and strategies
Confidence in Sevan Drilling as a company and in its business activities as a whole is essential for the company’s continuing competitiveness. The company aims to maintain high ethical standards in its business concept and relations with customers, suppliers and employees. The Board has defined the company’s values and has adopted ethical guidelines applicable to all employees. The guidelines are available on the company’s website.
The company has not established separate guidelines for corporate social responsibility (“CSR”) as recommended by the Code. The company was established and listed on Oslo Børs in 2011 and will establish guidelines for CSR during 2012.
2. BUSINESS ACTIVITY
The company’s business objective is set out in its articles of association section 3:
“to own and/or operate, directly or indirectly, drilling rigs, and activities related thereto, as well as investing in other companies.”
The company’s long term objective, following the clause above, is to become a premier drilling contractor owning and operating units specialising in offshore ultra-deep water operations.
The company will pursue the following main strategies to reach its overall objective:
• monitise its current design and technology by delivering safe, efficient and cost effective service and delivering new build units on time and within budget,
• pursue technological advancements with our unique hull design to maximise its flexibility to expand into growth areas in offshore drilling; and
• develop a strong, motivated work force that delivers outstanding service and results.
Sevan Drilling’s articles of association are available at the company’s website, www.sevandrilling.com.
3. EQUITY AND DIVIDEND
Equity
The Board aims to maintain a satisfactory equity ratio in the company in light of the company’s goals, strategy and risk profile, thereby ensuring that there is an appropriate balance between equity and other sources of financing. The Board regularly assesses the company’s capital requirements.
As per 31 December 2011, Sevan Drilling had equity of USD 672.2 million, representing an equity ratio of 42 percent. The company requires additional capital in the future to finance the instalments due on delivery of the two new vessels under construction, which equals 80 percent and 90 percent on Sevan Drilling Rig 3 and Sevan Drilling Rig 4 respectively as per 31 December 2011, corresponding to a total commitment of USD 900 million.
Dividend
The company’s objective is to generate a return for its shareholders through dividends and increases in the share price that is at least in line with the return available on similar investment opportunities of comparable risk. Due to the ongoing newbuilding programme in the company, Sevan Drilling does not intend to pay dividend to shareholders in the short term. Sevan Drilling is also restricted from making dividend payment in the bank loan agreements.
Authorisations to the Board
The Board will in the outset not propose that authoritisation to increase the share capital and to buy own shares are granted for periods longer than until the next Annual General Meeting of the company.
As per 31 December 2011, the Board did not hold any authorisations to increase the company’s share capital, nor to buy own shares.
At the extraordinary general meeting held on 9 January 2012, the Board was given authorisation to increase the company’s share capital by up to NOK 10,000,000. The authorisation may only be used for the issuance of shares pursuant to and for fulfillment of the company’s management and employee incentive program. The mandate is valid until the annual general meeting of 2013.
4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH RELATED PARTIES
The company has one class of shares with equal rights.
In the event that the Board is granted authorisations to buy own shares and decides to use this authorisation, the transactions will be carried out through the stock exchange or at prevailing stock exchange prices if carried out in any other way.
Any transactions, agreements or arrangements between the company and its shareholders, members of the Board, members of the executive management team or close associates of any such parties shall only be entered into as part of the ordinary course of business and on arms length market terms. All such transactions shall comply with the procedures set out in the Norwegian Public Limited Liability Companies Act or similar provisions, as applicable. The Board shall arrange for a valuation to be obtained from an independent third party unless the transaction, agreement or arrangement in question must be considered to be immaterial. The company’s financial statements shall provide further information about transactions with related parties.
Board members and members of the executive management team shall immediately notify the Board if they have any material direct or indirect interest in any transaction entered into by the company.
5. TRANSFER OF SHARES
The shares in the company may be freely transferred.
6. THE GENERAL MEETING
The annual general meeting of Sevan Drilling
The annual general meeting (“AGM”) is the company’s highest authority. The Board strives to ensure that the AGM is an effective forum for communication between the shareholders and the Board, and encourages shareholders to participate in the meeting.
Preparations for the AGM
The Annual General Meeting is held before 30 June, which is the latest date permitted by company law. The AGM for 2012 will be held on 15 May 2012.
The notice calling the AGM is made available on the company’s website, www.sevandrilling.com, and sent to shareholders no later than 21 days prior to the meeting, as recommended by the Code.
For extraordinary general meetings, the calling is available at least 14 days prior to the meeting.
The notices calling the general meetings shall provide information on the procedures shareholders must observe in order to participate in and vote at the general meeting. The notice will also set out:
• the procedure for representation at the meeting through a proxy, including a form to appoint a proxy, to allow for shareholders who are unable to attend in person will be able to vote by proxy and
• the right for shareholders to propose resolutions in respect of matters to be dealt with by the general meeting.
Section 7 of the company’s articles of association stipulates that the supporting documents dealing with matters to be considered by the AGM can be made available on the company’s website rather than being sent to shareholders by post. However, shareholders are still entitled to receive the documents by post upon request if they so wish.
The supporting documentation provides all the necessary information for shareholders to form a view on the matters to be considered.
The date of the next AGM is included in the company’s financial calendar. The financial calendar for the coming year is published no later than 31 December in the form of a stock exchange announcement and is also made available on the company’s website.
Agenda and conduct of the AGM
The Board decides the agenda for the AGM. The main agenda items are determined by the requirements of the Public Limited Liability Companies Act and Article 7 of the articles of association of Sevan Drilling.
The Board will seek to propose a person independent of the company and the Board to chair the general meetings, ensuring that the AGM has an independent chairperson in accordance with the recommendations of the Code.
Members of the Board and the nomination committee, as well as the company’s auditor are present at the annual general meeting.
The AGM minutes are published by issuing a stock exchange announcement, and are also made available on the company’s website at www.sevandrilling.com.
7. NOMINATION COMMITTEE
Sevan Drilling has a nomination committee consisting of three members, according to section 6 of the company’s articles of association.
The following three members were elected at the company’s extraordinary general meeting at 9 January 2012:
• Harald Thorstein, chairman
• Jarle Sjo
• Geir Tjetland
The members were elected for a period of two years. At the same meeting, instructions to the committee were approved.
Pursuant to section 6 of the articles of associations, the nomination committee shall propose board member candidates to the general meeting in connection with notices thereof. The nomination committee shall also make proposal for the remuneration of the Board.
8. THE BOARD - COMPOSITION AND INDEPENDENCE
The Board of Sevan Drilling is appointed by the general meeting. According to section 5 of the company’s articles of association, the Board shall consist of 3 to 9 members.
At the company’s extraordinary general meeting 9 January 2012, a new Board was elected. The general meeting also appointed the chairman of the Board. After this, the Board consists of five members, of which two are women.
The Board has the requisite competency to independently evaluate the cases presented by the management as well as the company’s operations, and function well as a body of colleagues.
The members of the Board represent varied and broad experience from relevant industries and areas of technical speciality, and the members bring experience from both Norwegian and international companies. More information about the board members expertise and background, as well as their holdings of shares in the company can be found on the company’s website, www.sevandrilling.com.
The Board does not include any members from the company’s executive management team and all the members are considered independent of the company’s material business contacts. Chairman of the board, Erling Lind, is also chairman of the board of Seadrill Management AS, 100% owned by Seadrill Ltd, while board member Per Wullf is the COO of Seadrill Ltd, which is the company’s main shareholder. All other members of the Board are considered independent of the company’s main shareholders.
9. THE WORK OF THE BOARD OF DIRECTORS
The Board prepares an annual plan for its work with special emphasis on goals, strategy and implementation. The Board’s primary responsibility is:
• participating in the development and approval of the company’s strategy,
• performing necessary monitoring functions and
• acting as an advisory body for the management team.
Its duties are not static, and the focus will depend on the company’s ongoing needs. The Board is also responsible for ensuring that the operation of the company is in compliance with the company’s values and ethical guidelines. The chairman of the Board is responsible for ensuring that the Board’s work is performed in an effective and correct manner.
The Board shall ensure that the company has a good management with clear internal distribution of responsibilities and duties. The CEO is responsible for the executive management and the day-to-day operations of the company. Further details on the duties of the Board are included in the instructions to the Board.
All members of the Board receive information about the company’s operational and financial development on a monthly basis. The company’s strategies shall regularly be subject to review and evaluation by the Board.
The Board evaluates its work on an annual basis. The evaluation will be made available to the nomination committee.
The company shall have a remuneration committee appointed by the Board. The purpose of the committee is to:
• Evaluate and propose the compensation of the company’s Chief Executive Officer (“CEO”) and other senior executives of the company.
• Produce an annual report on the compensation of the executive management team, which shall be included in the company’s annual accounts pursuant to applicable rules and regulations, including accounting standards, promulgated from time to time.
• Evaluate and propose incentive compensation plans and equity based plans for the company and any subsidiaries.
Further details on the committee’s duties and responsibilities are included in the instructions to the remuneration committee approved by the Board.
The company has an audit committee appointed by the Board as set out in the Norwegian Public Limited Liability Companies Act. The audit committee is appointed by the Board to assist the Board in fulfilling its obligations and responsibilities in respect to financial reporting, auditing and internal control in accordance with section 6-42 and 6-43 of the Norwegian Public Limited Liability Companies Act. The Board has appointed board members Anne Breive and Kristian Johansen to represent the Board in the audit committee.
The Audit Committee will not make any decisions on behalf of the Board, but will present its assessment and recommendations to the Board. The Board has approved instructions to the audit committee.
The Board may from to time also appoint other sub-committees, as deemed necessary or appropriate.
10. RISK MANAGEMENT AND INTERNAL CONTROL
The Board shall seek to ensure that the company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the company’s activities.
The Board shall ensure that the company’s internal control comprises guidelines, processes, duties, conduct and other matters that:
• facilitate targeted and effective operational arrangements for the company and also make it possible to manage commercial risk, operational risk, the risk of breaching applicable legislation and regulations as well as all other forms of risk that may be material for achieving the company’s commercial objectives;
• contribute to ensuring the quality of internal and external reporting; and
• contribute to ensuring that the company operates in accordance with the relevant legislation and regulations as well as with its internal guidelines for its activities, including the company’s ethical guidelines and corporate values.
When separate guidelines for CSR are established, these will also be included in the company’s systems.
The Board shall form its own opinion on the company’s internal controls, based on the information presented to the Board. Reporting by executive management to the Board shall be prepared in a format which gives a balanced presentation of all risks of material significance, and of how the internal control system handles these risks.
The Board has approved routines for internal control and risk management. The objective for the company’s risk management and internal control is to manage, rather than eliminate, exposure to risks related to the successful conduct of the company’s business and to support the quality of its financial reporting. Effective risk management and good internal control contribute to securing shareholders’ investment in the company and the company’s assets.
The Board shall carry out an annual review of the company’s most important areas of exposure to risk and its internal control arrangements, and provide an account in the annual report of the main features of the company’s internal control and risk management systems as they relate to the company’s financial reporting.
Sevan Drilling has an audit committee. Within risk management and internal control, the committee’s duties and responsibilities include;
• Monitoring the financial reporting process, focusing on the following main areas:
– changes in accounting principles
– critical accounting estimates or judgments
– material adjustments to the accounts requested or suggested by the statutory auditor
– areas where there is a difference of opinion between the management and the statutory auditor
• Monitoring the effectiveness of the company’s financial reporting processes, internal control, and internal audit where applicable, and risk management systems.
• Monitoring the statutory audit of the annual accounts.
• Establishing and evaluating procedures for the correct handling and registering of complaints relating to financial reporting, accounting, internal control and statutory audit.
11. BOARD COMPENSATION
The general meeting annually determines the Board’s remuneration, based on proposal by the nomination committee. Remuneration of board members shall be reasonable and based on the Board’s responsibilities, work, time invested and the complexity of the enterprise. The compensation shall be a fixed annual amount. The chairman of the Board may receive a higher compensation than the other members. The Board shall be informed if individual board members perform other tasks for the company than exercising their role as board members. Work in sub-committees may be compensated in addition to the remuneration received for board membership.
The company’s annual accounts provide information about the Board’s compensation.
12. COMPENSATION TO EXECUTIVE MANAGEMENT
The Board decides the salary and other compensation to the CEO, however so that any compensation linked to the value of the company’s shares shall be approved by the general meeting in accordance with the Norwegian Public Limited Companies Act. The CEO’s salary and bonus shall be determined on the basis of an evaluation with emphasis on the following factors: financial results, business development, employee and customer satisfaction. Any fringe benefits shall be in line with market practice, and should not be substantial in relation to the CEO’s basic salary. The performance related remuneration is subject to an absolute limit. This is further described in the company’s compensation policy.
The Board annually carries out an assessment of the salary and other remuneration to the CEO.
The company’s annual accounts provide information about salary and other compensation to the CEO and the executive management team.
The CEO determines the remuneration of executive employees based on guidelines for the remuneration prepared by the Board through the remuneration committee. The guidelines lay down the main principles for the company’s management remuneration policy. The salary levels should not be of a size that could harm the company’s reputation, or above the norm in comparable companies. The salary levels should, however, ensure that the company can attract and retain executive employees with the desired expertise and experience.
13. INFORMATION AND COMMUNICATION
Sevan Drilling maintains a proactive dialogue with analysts, investors and other stakeholders of the company. The company strives to continuously publish relevant information to the market in a timely, effective and non-discriminatory manner, and has a clear goal to attract both Norwegian and foreign investors and to promote higher stock liquidity. Emphasis is placed on ensuring that the shareholders receive identical and simultaneous information.
All stock exchange announcements are made available on the Oslo Børs website, www.newsweb.no, as well as on the company’s website, www.sevandrilling.com. The announcements are also distributed to news agencies and other online services through Thomson Reuters.
Sevan Drilling publishes its preliminary annual accounts by the end of February and the complete annual report, including approved and final annual accounts and the Board of Directors report, is available no later than 30 April each year as required by the Securities Trading Act.
The company’s financial calendar for the coming year is published as a stock exchange announcement and made available on the company’s website no later than 31 December each year, in accordance with the continuing obligations for companies listed on Oslo Børs.
Sevan Drilling holds open presentations in connection with the publication of the company’s quarterly results. The presentations are webcasted for the benefit of investors who are not able to attend the presentations. At the presentations, the executive management review and comment on the published results, market conditions and the company’s future prospects.
The company’s management gives high priority to communication with the investor market. Individual meetings are organised for major investors, investment managers and analysts. The company also attends investor conferences.
The Board has issued guidelines for the investor relations function of the company, including authorised spokespersons of the company.
14. TAKE-OVERS
The Board has established guiding principles for how it will act in event of a take-over bid for the company. It sets out that the Board will
• seek to follow a general principle of equal treatment and help to ensure equal treatment of all shareholders;
• seek to ensure that the company’s business activities are not disrupted unnecessarily;
• seek to ensure that shareholders are given sufficient information and time to form a view of any take-over bid;
• not unjustily seek to prevent any take-over bid, unless this is believed to be in the interests of the company and the shareholders;
• in due course issue a statement on the take-over bid in accordance with statutory requirements and applicable Norwegian corporate governance recommendations; and
• consider and, if deemed necessary or purposeful, arrange for a valuation of the take-over bid by an independent expert, the conclusion of which will be made available to shareholders.
Any transaction that is in effect a disposal of the company’s activities will be sought submitted to the general meeting for approval.
15. AUDITOR
Sevan Drilling is audited by PricewaterhouseCoopers in Stavanger, Norway.
Each year the auditor present to the Board a plan for the audit work and confirm that the auditor satisfies established requirements as to independence and objectivity.
The auditor shall be present at Board meetings where the annual accounts are on the agenda. Whenever necessary, the Board shall meet with the auditor to review the auditor’s view on the company’s accounting principles, risk areas, internal control routines etc.
The use of the auditor as a financial advisor to the company should be sought limited to cases where such use of the auditor does not have the ability to affect or question the auditors’ independence and objectiveness as auditor for the company. Only the company’s CEO and/or CFO shall have the authority to enter into agreements in respect of such counselling assignments.
At the Annual General Meeting, the Board shall present a review of the auditor’s compensation as paid for auditory work required by law and remuneration associated with other assignments.
In connection with the auditor’s presentation to the Board of the annual work plan, the Board should specifically consider if the auditor to a satisfactory degree also carries out a control function.
The Board shall arrange for the auditor to attend general meetings as and where appropriate.
Sevan Drilling is committed to sound corporate governance principles and thereby contribute to optimal value creation over time. The objective of corporate governance is to regulate the division of roles between shareholders, the Board and executive management more comprehensively than is required by legislation.
1. IMPLEMENTATION AND REPORTING ON CORPORATE GOVERNANCE
Implementation and regulations
Sevan Drilling ASA’s (“Sevan Drilling” or “the company”) Board of Directors (the “Board”) has the ultimate responsibility for ensuring that the company practices good corporate governance and has prepared and approved the company’s policy for corporate governance. The company, through its Board and executive management, carries out an annual review of its principles for corporate governance.
Sevan Drilling is a Norwegian public limited company listed on Oslo Børs. The Norwegian Accounting Act includes provisions on corporate governance at Section 3-3b which impose a duty on the company to issue an annual statement on its principles and practice for corporate governance. These provisions also stipulate minimum requirements for the content of this report.
The Norwegian Corporate Governance Board (NCGB) has issued the Norwegian Code of Practice for Corporate Governance (the “Code”). Adherence to the Code is based on the “comply or explain” principle, which means that a company must comply with the recommendations of the Code or explain why it has chosen an alternative approach to specific recommendations.
Oslo Børs requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code in force at the time. The Continuing Obligations of listed companies are available on www.oslobors.no.
Sevan Drilling complies with the above mentioned rules and regulations, and the current Code, issued on 21 October 2010 and amended on 20 October 2011, unless otherwise specifically stated. The company provides a statement on its principles for corporate governance in its annual report, and this information is also available on the company website, www.sevandrilling.com.
Values, objectives and strategies
Confidence in Sevan Drilling as a company and in its business activities as a whole is essential for the company’s continuing competitiveness. The company aims to maintain high ethical standards in its business concept and relations with customers, suppliers and employees. The Board has defined the company’s values and has adopted ethical guidelines applicable to all employees. The guidelines are available on the company’s website.
The company has not established separate guidelines for corporate social responsibility (“CSR”) as recommended by the Code. The company was established and listed on Oslo Børs in 2011 and will establish guidelines for CSR during 2012.
2. BUSINESS ACTIVITY
The company’s business objective is set out in its articles of association section 3:
“to own and/or operate, directly or indirectly, drilling rigs, and activities related thereto, as well as investing in other companies.”
The company’s long term objective, following the clause above, is to become a premier drilling contractor owning and operating units specialising in offshore ultra-deep water operations.
The company will pursue the following main strategies to reach its overall objective:
• monitise its current design and technology by delivering safe, efficient and cost effective service and delivering new build units on time and within budget,
• pursue technological advancements with our unique hull design to maximise its flexibility to expand into growth areas in offshore drilling; and
• develop a strong, motivated work force that delivers outstanding service and results.
Sevan Drilling’s articles of association are available at the company’s website, www.sevandrilling.com.
3. EQUITY AND DIVIDEND
Equity
The Board aims to maintain a satisfactory equity ratio in the company in light of the company’s goals, strategy and risk profile, thereby ensuring that there is an appropriate balance between equity and other sources of financing. The Board regularly assesses the company’s capital requirements.
As per 31 December 2011, Sevan Drilling had equity of USD 672.2 million, representing an equity ratio of 42 percent. The company requires additional capital in the future to finance the instalments due on delivery of the two new vessels under construction, which equals 80 percent and 90 percent on Sevan Drilling Rig 3 and Sevan Drilling Rig 4 respectively as per 31 December 2011, corresponding to a total commitment of USD 900 million.
Dividend
The company’s objective is to generate a return for its shareholders through dividends and increases in the share price that is at least in line with the return available on similar investment opportunities of comparable risk. Due to the ongoing newbuilding programme in the company, Sevan Drilling does not intend to pay dividend to shareholders in the short term. Sevan Drilling is also restricted from making dividend payment in the bank loan agreements.
Authorisations to the Board
The Board will in the outset not propose that authoritisation to increase the share capital and to buy own shares are granted for periods longer than until the next Annual General Meeting of the company.
As per 31 December 2011, the Board did not hold any authorisations to increase the company’s share capital, nor to buy own shares.
At the extraordinary general meeting held on 9 January 2012, the Board was given authorisation to increase the company’s share capital by up to NOK 10,000,000. The authorisation may only be used for the issuance of shares pursuant to and for fulfillment of the company’s management and employee incentive program. The mandate is valid until the annual general meeting of 2013.
4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH RELATED PARTIES
The company has one class of shares with equal rights.
In the event that the Board is granted authorisations to buy own shares and decides to use this authorisation, the transactions will be carried out through the stock exchange or at prevailing stock exchange prices if carried out in any other way.
Any transactions, agreements or arrangements between the company and its shareholders, members of the Board, members of the executive management team or close associates of any such parties shall only be entered into as part of the ordinary course of business and on arms length market terms. All such transactions shall comply with the procedures set out in the Norwegian Public Limited Liability Companies Act or similar provisions, as applicable. The Board shall arrange for a valuation to be obtained from an independent third party unless the transaction, agreement or arrangement in question must be considered to be immaterial. The company’s financial statements shall provide further information about transactions with related parties.
Board members and members of the executive management team shall immediately notify the Board if they have any material direct or indirect interest in any transaction entered into by the company.
5. TRANSFER OF SHARES
The shares in the company may be freely transferred.
6. THE GENERAL MEETING
The annual general meeting of Sevan Drilling
The annual general meeting (“AGM”) is the company’s highest authority. The Board strives to ensure that the AGM is an effective forum for communication between the shareholders and the Board, and encourages shareholders to participate in the meeting.
Preparations for the AGM
The Annual General Meeting is held before 30 June, which is the latest date permitted by company law. The AGM for 2012 will be held on 15 May 2012.
The notice calling the AGM is made available on the company’s website, www.sevandrilling.com, and sent to shareholders no later than 21 days prior to the meeting, as recommended by the Code.
For extraordinary general meetings, the calling is available at least 14 days prior to the meeting.
The notices calling the general meetings shall provide information on the procedures shareholders must observe in order to participate in and vote at the general meeting. The notice will also set out:
• the procedure for representation at the meeting through a proxy, including a form to appoint a proxy, to allow for shareholders who are unable to attend in person will be able to vote by proxy and
• the right for shareholders to propose resolutions in respect of matters to be dealt with by the general meeting.
Section 7 of the company’s articles of association stipulates that the supporting documents dealing with matters to be considered by the AGM can be made available on the company’s website rather than being sent to shareholders by post. However, shareholders are still entitled to receive the documents by post upon request if they so wish.
The supporting documentation provides all the necessary information for shareholders to form a view on the matters to be considered.
The date of the next AGM is included in the company’s financial calendar. The financial calendar for the coming year is published no later than 31 December in the form of a stock exchange announcement and is also made available on the company’s website.
Agenda and conduct of the AGM
The Board decides the agenda for the AGM. The main agenda items are determined by the requirements of the Public Limited Liability Companies Act and Article 7 of the articles of association of Sevan Drilling.
The Board will seek to propose a person independent of the company and the Board to chair the general meetings, ensuring that the AGM has an independent chairperson in accordance with the recommendations of the Code.
Members of the Board and the nomination committee, as well as the company’s auditor are present at the annual general meeting.
The AGM minutes are published by issuing a stock exchange announcement, and are also made available on the company’s website at www.sevandrilling.com.
7. NOMINATION COMMITTEE
Sevan Drilling has a nomination committee consisting of three members, according to section 6 of the company’s articles of association.
The following three members were elected at the company’s extraordinary general meeting at 9 January 2012:
• Harald Thorstein, chairman
• Jarle Sjo
• Geir Tjetland
The members were elected for a period of two years. At the same meeting, instructions to the committee were approved.
Pursuant to section 6 of the articles of associations, the nomination committee shall propose board member candidates to the general meeting in connection with notices thereof. The nomination committee shall also make proposal for the remuneration of the Board.
8. THE BOARD - COMPOSITION AND INDEPENDENCE
The Board of Sevan Drilling is appointed by the general meeting. According to section 5 of the company’s articles of association, the Board shall consist of 3 to 9 members.
At the company’s extraordinary general meeting 9 January 2012, a new Board was elected. The general meeting also appointed the chairman of the Board. After this, the Board consists of five members, of which two are women.
The Board has the requisite competency to independently evaluate the cases presented by the management as well as the company’s operations, and function well as a body of colleagues.
The members of the Board represent varied and broad experience from relevant industries and areas of technical speciality, and the members bring experience from both Norwegian and international companies. More information about the board members expertise and background, as well as their holdings of shares in the company can be found on the company’s website, www.sevandrilling.com.
The Board does not include any members from the company’s executive management team and all the members are considered independent of the company’s material business contacts. Chairman of the board, Erling Lind, is also chairman of the board of Seadrill Management AS, 100% owned by Seadrill Ltd, while board member Per Wullf is the COO of Seadrill Ltd, which is the company’s main shareholder. All other members of the Board are considered independent of the company’s main shareholders.
9. THE WORK OF THE BOARD OF DIRECTORS
The Board prepares an annual plan for its work with special emphasis on goals, strategy and implementation. The Board’s primary responsibility is:
• participating in the development and approval of the company’s strategy,
• performing necessary monitoring functions and
• acting as an advisory body for the management team.
Its duties are not static, and the focus will depend on the company’s ongoing needs. The Board is also responsible for ensuring that the operation of the company is in compliance with the company’s values and ethical guidelines. The chairman of the Board is responsible for ensuring that the Board’s work is performed in an effective and correct manner.
The Board shall ensure that the company has a good management with clear internal distribution of responsibilities and duties. The CEO is responsible for the executive management and the day-to-day operations of the company. Further details on the duties of the Board are included in the instructions to the Board.
All members of the Board receive information about the company’s operational and financial development on a monthly basis. The company’s strategies shall regularly be subject to review and evaluation by the Board.
The Board evaluates its work on an annual basis. The evaluation will be made available to the nomination committee.
The company shall have a remuneration committee appointed by the Board. The purpose of the committee is to:
• Evaluate and propose the compensation of the company’s Chief Executive Officer (“CEO”) and other senior executives of the company.
• Produce an annual report on the compensation of the executive management team, which shall be included in the company’s annual accounts pursuant to applicable rules and regulations, including accounting standards, promulgated from time to time.
• Evaluate and propose incentive compensation plans and equity based plans for the company and any subsidiaries.
Further details on the committee’s duties and responsibilities are included in the instructions to the remuneration committee approved by the Board.
The company has an audit committee appointed by the Board as set out in the Norwegian Public Limited Liability Companies Act. The audit committee is appointed by the Board to assist the Board in fulfilling its obligations and responsibilities in respect to financial reporting, auditing and internal control in accordance with section 6-42 and 6-43 of the Norwegian Public Limited Liability Companies Act. The Board has appointed board members Anne Breive and Kristian Johansen to represent the Board in the audit committee.
The Audit Committee will not make any decisions on behalf of the Board, but will present its assessment and recommendations to the Board. The Board has approved instructions to the audit committee.
The Board may from to time also appoint other sub-committees, as deemed necessary or appropriate.
10. RISK MANAGEMENT AND INTERNAL CONTROL
The Board shall seek to ensure that the company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the company’s activities.
The Board shall ensure that the company’s internal control comprises guidelines, processes, duties, conduct and other matters that:
• facilitate targeted and effective operational arrangements for the company and also make it possible to manage commercial risk, operational risk, the risk of breaching applicable legislation and regulations as well as all other forms of risk that may be material for achieving the company’s commercial objectives;
• contribute to ensuring the quality of internal and external reporting; and
• contribute to ensuring that the company operates in accordance with the relevant legislation and regulations as well as with its internal guidelines for its activities, including the company’s ethical guidelines and corporate values.
When separate guidelines for CSR are established, these will also be included in the company’s systems.
The Board shall form its own opinion on the company’s internal controls, based on the information presented to the Board. Reporting by executive management to the Board shall be prepared in a format which gives a balanced presentation of all risks of material significance, and of how the internal control system handles these risks.
The Board has approved routines for internal control and risk management. The objective for the company’s risk management and internal control is to manage, rather than eliminate, exposure to risks related to the successful conduct of the company’s business and to support the quality of its financial reporting. Effective risk management and good internal control contribute to securing shareholders’ investment in the company and the company’s assets.
The Board shall carry out an annual review of the company’s most important areas of exposure to risk and its internal control arrangements, and provide an account in the annual report of the main features of the company’s internal control and risk management systems as they relate to the company’s financial reporting.
Sevan Drilling has an audit committee. Within risk management and internal control, the committee’s duties and responsibilities include;
• Monitoring the financial reporting process, focusing on the following main areas:
– changes in accounting principles
– critical accounting estimates or judgments
– material adjustments to the accounts requested or suggested by the statutory auditor
– areas where there is a difference of opinion between the management and the statutory auditor
• Monitoring the effectiveness of the company’s financial reporting processes, internal control, and internal audit where applicable, and risk management systems.
• Monitoring the statutory audit of the annual accounts.
• Establishing and evaluating procedures for the correct handling and registering of complaints relating to financial reporting, accounting, internal control and statutory audit.
11. BOARD COMPENSATION
The general meeting annually determines the Board’s remuneration, based on proposal by the nomination committee. Remuneration of board members shall be reasonable and based on the Board’s responsibilities, work, time invested and the complexity of the enterprise. The compensation shall be a fixed annual amount. The chairman of the Board may receive a higher compensation than the other members. The Board shall be informed if individual board members perform other tasks for the company than exercising their role as board members. Work in sub-committees may be compensated in addition to the remuneration received for board membership.
The company’s annual accounts provide information about the Board’s compensation.
12. COMPENSATION TO EXECUTIVE MANAGEMENT
The Board decides the salary and other compensation to the CEO, however so that any compensation linked to the value of the company’s shares shall be approved by the general meeting in accordance with the Norwegian Public Limited Companies Act. The CEO’s salary and bonus shall be determined on the basis of an evaluation with emphasis on the following factors: financial results, business development, employee and customer satisfaction. Any fringe benefits shall be in line with market practice, and should not be substantial in relation to the CEO’s basic salary. The performance related remuneration is subject to an absolute limit. This is further described in the company’s compensation policy.
The Board annually carries out an assessment of the salary and other remuneration to the CEO.
The company’s annual accounts provide information about salary and other compensation to the CEO and the executive management team.
The CEO determines the remuneration of executive employees based on guidelines for the remuneration prepared by the Board through the remuneration committee. The guidelines lay down the main principles for the company’s management remuneration policy. The salary levels should not be of a size that could harm the company’s reputation, or above the norm in comparable companies. The salary levels should, however, ensure that the company can attract and retain executive employees with the desired expertise and experience.
13. INFORMATION AND COMMUNICATION
Sevan Drilling maintains a proactive dialogue with analysts, investors and other stakeholders of the company. The company strives to continuously publish relevant information to the market in a timely, effective and non-discriminatory manner, and has a clear goal to attract both Norwegian and foreign investors and to promote higher stock liquidity. Emphasis is placed on ensuring that the shareholders receive identical and simultaneous information.
All stock exchange announcements are made available on the Oslo Børs website, www.newsweb.no, as well as on the company’s website, www.sevandrilling.com. The announcements are also distributed to news agencies and other online services through Thomson Reuters.
Sevan Drilling publishes its preliminary annual accounts by the end of February and the complete annual report, including approved and final annual accounts and the Board of Directors report, is available no later than 30 April each year as required by the Securities Trading Act.
The company’s financial calendar for the coming year is published as a stock exchange announcement and made available on the company’s website no later than 31 December each year, in accordance with the continuing obligations for companies listed on Oslo Børs.
Sevan Drilling holds open presentations in connection with the publication of the company’s quarterly results. The presentations are webcasted for the benefit of investors who are not able to attend the presentations. At the presentations, the executive management review and comment on the published results, market conditions and the company’s future prospects.
The company’s management gives high priority to communication with the investor market. Individual meetings are organised for major investors, investment managers and analysts. The company also attends investor conferences.
The Board has issued guidelines for the investor relations function of the company, including authorised spokespersons of the company.
14. TAKE-OVERS
The Board has established guiding principles for how it will act in event of a take-over bid for the company. It sets out that the Board will
• seek to follow a general principle of equal treatment and help to ensure equal treatment of all shareholders;
• seek to ensure that the company’s business activities are not disrupted unnecessarily;
• seek to ensure that shareholders are given sufficient information and time to form a view of any take-over bid;
• not unjustily seek to prevent any take-over bid, unless this is believed to be in the interests of the company and the shareholders;
• in due course issue a statement on the take-over bid in accordance with statutory requirements and applicable Norwegian corporate governance recommendations; and
• consider and, if deemed necessary or purposeful, arrange for a valuation of the take-over bid by an independent expert, the conclusion of which will be made available to shareholders.
Any transaction that is in effect a disposal of the company’s activities will be sought submitted to the general meeting for approval.
15. AUDITOR
Sevan Drilling is audited by PricewaterhouseCoopers in Stavanger, Norway.
Each year the auditor present to the Board a plan for the audit work and confirm that the auditor satisfies established requirements as to independence and objectivity.
The auditor shall be present at Board meetings where the annual accounts are on the agenda. Whenever necessary, the Board shall meet with the auditor to review the auditor’s view on the company’s accounting principles, risk areas, internal control routines etc.
The use of the auditor as a financial advisor to the company should be sought limited to cases where such use of the auditor does not have the ability to affect or question the auditors’ independence and objectiveness as auditor for the company. Only the company’s CEO and/or CFO shall have the authority to enter into agreements in respect of such counselling assignments.
At the Annual General Meeting, the Board shall present a review of the auditor’s compensation as paid for auditory work required by law and remuneration associated with other assignments.
In connection with the auditor’s presentation to the Board of the annual work plan, the Board should specifically consider if the auditor to a satisfactory degree also carries out a control function.
The Board shall arrange for the auditor to attend general meetings as and where appropriate.