1
Appendix to Master Thesis:
A Benchmark Study to Develop a Corporate Governance Charter for
Esko BVBA
University of Groningen, the Netherlands
Master Business Administration, Finance
Author: Lin Yan
Student ID: 1822705
2
APPENDIX LIST
1. Appendix A. General Framework of A Corporate Governance Charter
2. Appendix B. Tailor-made Structure of A Corporate Governance Charter for Esko
3. Appendix C. SOX Scorecards of Esko and Reference Companies
4. Appendix D. Buysse Scorecards of Esko and Reference Companies
3 Appendix A. General Framework of A Corporate Governance Charter
(Based on the 2009 code and the Corporate Governance Charters of AB Inbev and Delhaize Group)
I. General
A. A statement that the company adopts the 2009 Code as its reference code [9.4]1
B. A description of the governance structure of the company [Principle 1] II. Shareholder and General Shareholder Meetings
A. Identity, voting rights and special control rights of its major shareholders [8.4]
B. General shareholders‟ meetings
III. Terms of Reference of the Board [1.1, 2.9] A. Composition and appointment2
B. Responsibilities C. Chairmanship D. Board meetings E. Evaluation F. Remuneration
IV. Terms of Reference of Specialized Committees of the Board [5.1]
(Audit Committee, Nomination Committee, and Remuneration Committee) A. Composition and organization
B. Meeting and committee resources C. Responsibilities
(In the case of Audit Committee, specific areas of responsibilities include) a. Financial reporting
b. Internal control and risk management c. Internal audit
d. External audit
V. Terms of Reference of the Executive Management [6.1] A. CEO
4
b. Responsibilities
c. Remuneration and performance evaluation B. Other members of the Executive Management
a. Appointment b. Responsibilities
c. Remuneration and performance evaluation VI. Related Party Transaction Policy3 [3.6] [6.8] VII. Insider Dealing Code4 [3.7]
Note:
1. The numbers in brackets refer to the provisions in the 2009 Code regarding disclosure requirement for a CG charter.
2. Criteria in determining the directors‟ independency are normally described in the composition and appoint of the board.
3. Related party transaction policy refers to “the policy established by the board for transactions and other contractual relationships between the company, including its related companies, and its board members and executive managers, to the extent not covered by the legal provisions on conflicts of interest” (the 2009 Code, Appendix F,).
5 Appendix B. Tailor-made Structure of A Corporate Governance Charter for Esko
I. Governance Structure
II. Shareholder and General Shareholder Meetings A. Shareholder structure
B. General shareholders‟ meetings III. Terms of Reference of the Board
A. Composition and appointment1 B. Responsibilities
C. Chairmanship D. Board meeting E. Evaluation F. Remuneration
IV. Terms of Reference of Specialized Committees of the Board A. Audit Committee
a. Composition and organization b. Meeting and committee resources c. Responsibilities with respect to
i. Financial reporting
ii. Internal control and risk management iii. Internal audit
iv. External audit
B. Human Resource and Remuneration Committee a. Composition and organization
b. Meeting and committee resources c. Responsibilities
V. Terms of reference of the CEO and the Senior Management A. CEO
a. Appointment b. Responsibilities
6
B. Senior Management a. Appointment b. Responsibilities
c. Remuneration and performance evaluation VI. Code of Conduct2
Note:
1. In this section, a set of criteria in determining directors‟ independency are normally described.
7 Appendix F. Revised Corporate Governance Charter of Esko
Corporate Governance Charter Esko BVBA
May, 2011
Notes:
The charter is based on provisions of: SOX (Sec.301, 302, and 404); Buysse Code II;
8 TABLE OF CONTENT
I. GOVERNANCE STRUCTURE ... 9
II. SHAREHOLDER AND GENERAL SHAREHOLDERS’ MEETINGS ... 9
A.SHAREHOLDER STRUCTURE ... 9
B.GENERAL SHAREHOLDERS‟ MEETINGS ... 9
III. THE BOARD OF DIRECTORS ... 11
A.COMPOSITION AND APPOINTMENT ... 11
B.RESPONSIBILITIES ... 11
C.CHAIRMAN OF THE BOARD ... 14
D.BOARD MEETINGS ... 15
E.EVALUATION ... 15
F.REMUNERATION ... 16
IV. SPECIALIZED COMMITTEES OF THE BOARD ... 17
A.AUDIT COMMITTEE... 17
a. Composition and organization ... 17
b. Meetings and committee resources ... 18
c. Responsibilities ... 19
B.HR&REMUNERATION COMMITTEE ... 23
a. Composition and organization ... 23
b. Meetings and committee resources ... 23
c. Responsibilities ... 24
V. CEO AND THE SENIOR MANAGEMENT ... 26
A.CEO ... 26
a. Appointment ... 26
b. Responsibilities ... 26
c. Remuneration and performance evaluation ... 28
B.THE SENIOR MANAGEMENT ... 28
a. Appointment ... 28
b. Responsibilities ... 28
c. Remuneration and performance evaluation ... 28
9 I. Governance Structure
The governance structure of Esko BVBA (hereafter Esko) is organized as follows:
1. The company is headed by a „one-tier‟ board. The board of directors of Esko (hereafter the „Board‟) is the ultimate decision-making body entrusted with all powers except for that reserved to the general shareholders‟ meetings. The Board operates in a collegial nature.
2. The Chief Executive Officer (hereafter the “CEO”) is entrusted by the Board with daily management of Esko and all its legal entities.
3. The Senior Management includes all of the CEO‟s direct reports who assist the CEO with daily management of Esko and all its legal entities.
II. Shareholder and General Shareholders’ Meetings A. Shareholder structure
Esko BVBA is part of an international group of companies of which the ultimate parent company is the Danaher Corporation (hereafter “Danaher”), a US based company listed on the NYSE. Danaher Corporation owns 100% of shares of Esko BVBA as started from March 2011.
B. General shareholders’ meetings
1. The Board sets the rules of procedure of the General Shareholders‟ Meetings (hereafter the “GSM”).
2. The agenda of an ordinary GSM typically includes the following items: i. election of a chairman of the meeting;
ii. presentation of the Board‟s report on the company‟s business during the preceding financial year;
Board of Directors
CEO
10
iii. submission of the annual financial statements of the preceding financial year with external auditor's report for approval;
iv. decision with respect to the distribution of profit of the preceding financial year;
v. authorization of the Board to make extraordinary distribution of dividend; vi. appointment or renewal of the external auditor; at the proposal by the
Board;
Given Esko is a division of Danaher, the rights to appointment and dismissal of external auditor is reserved to the Audit Committee of Danaher. As required by Sec.301 of SOX, the Audit Committee of Danaher has “the sole authority to appoint, retain, compensate, evaluate and terminate the independent auditor, subject, if applicable, to shareholder ratification”. More details can be found in Charter of the Audit Committee of the Board of Directors of Danaher Corporation (Page 2, revised version in 2007). Moreover, according to Danaher’s policy, the CFO of Danaher’s local entity is responsible for direct contact with the external auditor which is appointed by Danaher.
However, in the case that Esko is a standing alone company, the rights to appointment and dismiss the external auditor are reserved to the GSM under the Belgian Law. .
vii. appointment or renewal of the board directors;
viii. decision with respect to the remuneration of directors at the proposal by the Board;
ix. any other proposals made by the Board or the shareholders.
3. The Board should take measures to forester an effective dialogue with the shareholders based on a mutual understanding of objectives and concerns. 4. The Board shall take direct action to promote shareholder involvement in the
company, such as periodic and timely information and communication including
11 III. The Board of Directors
A. Composition and appointment
1. Directors are appointed by the GSM on the recommendation of the Board. 2. The Board is operated with a collegial nature.
3. The Board should include minimum three directors.
4. One-half of the Board should be non-executive directors, and at least three of them are independent.
Given that Esko is a division of Danaher, this is temporarily not applicable for Esko.
5. As set in the Sec.301 of SOX, a director can be qualified as independent if the following criteria are met:
i. NOT accepting any consulting, advisory, or other compensatory fee from the company, other than being a member of the audit committee, the Board, or any other committees of the board; and
ii. NOT being an affiliated person of the issuer or any subsidiary thereof.
Given that Esko is a division of Danaher, this is temporarily not applicable for Esko.
6. The Chairman of the Board and the CEO should be avoided to be the same individual. In forming the Board for the best interest of the company, the complementarity of board members in terms of skills, experience, knowledge and diversity should be taken into consideration.
7. The independent directors should be provided with necessary training, information and resources to fulfill their tasks properly.
8. The CFO functions as a secretary to the Board.
9. The Board may appoint a company secretary in advising the Board on all governance matters.
B. Responsibilities
1. The responsibilities of the Board should be distinguished from that of the GSM, the CEO, the Senior Management, and the management in general.
12
i. take decisions regarding important and strategic issues, and the risk appetite of the company. Corporate Social Responsibilities should be considered in making such decisions;
ii. review the performance of the management in realization of company‟s strategy and ensure that the management and shareholders take the initiatives that fall within their competence;
iii. take all necessary measures to ensure the integrity and timely disclosure of the company's financial statements and other material financial and non-financial information disclosed to the shareholders;
iv. approve a framework of internal control and risk management set up by the CEO and Senior Management;
v. review the implementation of this framework, and if applicable, taking into account the review made by the Audit Committee;
vi. appoint the members and chairmanship of the specialized committees of the Board;
Given that Esko is a division of Danaher, this is temporarily not applicable for Esko.
vii. oversee and periodically evaluate the activities and composition of the specialized committees of the Board;
Given that Esko is a division of Danaher, this is temporarily not applicable for Esko.
viii. supervise the performance of the external auditor and supervise the internal audit function, and if applicable, taking into account the review made by the Audit Committee;
ix. decide on the Senior Management structure and determine, in close consultation with the CEO, the powers and duties entrusted to the Senior Management;
13
xi. appoint the CEO on the advice of the HR & Remuneration Committee, and other members of the Senior Management on the advice of the CEO and the HR & Remuneration Committee;
xii. prepare for and organize the succession planning of the CEO and the Senior Management;
xiii. decide on the evaluation procedure and remuneration policy regarding the CEO and the Senior Management;
xiv. outline the dividend policy which will then be put forward for approval by the GSM;
xv. establish procedures regarding how management reports to the Board and any other communication between the Board and management;
xvi. safeguard the interests of the company in the event of crisis and conflict. 3. The board directors are under the obligations to:
i. have an ethical attitude all the times, make independent judgment in decisions, and ensure no conflict of interests between the s/he and the company; inform the Board with perfect transparency regarding the activities which his/her interests may have potential conflict with those of the company;
ii. evaluate whether s/he is sufficiently competent and has sufficient time to fulfill the mandate properly before accepting a mandate as a director; and report to the Chairman of the Board any changes to their other relevant commitments and their new commitments out-side the company as they arise; The non-executive directors are advised NOT to take on more than five directorships in listed companies.
iii. be well prepared before each board meeting, and participate actively and expertly in the discussion and decision-making, and be expected to be available for discussion in between board meetings;
14
v. update his/her skills and improve the knowledge of the company to fulfill their role as a director.
4. In order to properly carry out his/her duties, each individual director has a right to request information of the company from the Board, preferably from the Chairman of the Board.
C. Chairman of the Board
a. The Chairman of the Board should be elected based on his/her knowledge, skills, experience and mediation strength.
b. The role of the Chairman of the Board shall consists of:
i. presiding over the Board, and make the Board functions as a team;
ii. taking the measures necessary to create a climate of trust within the Board, which contributes to open discussion, constructive criticism and support for the decisions of the board;
iii. being the guardian of the processes that govern the functioning of the Board; iv. establishing a close relationship with the CEO;
v. giving wise counsel, to the shareholders as well as to the CEO and Senior Management;
vi. having the profile of a mediator and an arbitrator;
vii. leading and guiding the process of appointing the CEO, the Senior Management and the board members;
viii. ensuring that newly appointed directors are properly informed about the fundamentals of the company and familiarized with it.
c. The specific responsibilities of the Chairman, on a non exhaustive basis, shall consist of:
i. setting the agenda for board meetings after consultation with CEO and sees to it that the procedure is followed concerning the preparation, discussion, approval and implementation of decisions;
15
iii. taking the necessary measures to ensure that any relevant questions from shareholders are answered;
iv. making proposals to the Board regarding the chairmanship of the specialized committees of the Board, if applicable;
v. initiating the evaluation of the Board, the board members, and if applicable, the evaluation of board committees; and giving necessary feedback and rectifying any inadequacy shown from the evaluation of the Board, and also informing the GSM.
d. The Board may entrust the Chairman with other specific responsibilities.
D. Board meetings
a. The Board shall meet four times a year discussing the operational performance when convened by the Chairman of the Board; and shall meet once a year to discuss the group‟s long-term strategy. The board meetings are to take place at the company‟s offices unless other circumstances are in favor of a different location.
b. The non-executive directors should be allowed, when applicable, to meet without
presence of executive directors at least once a year
Given that Esko is a division of Danaher and there is only one non-executive director, this is temporarily not applicable for Esko.
c. The secretary of the Board, i.e. the CFO, is responsible for making the minutes of
board meetings. The minutes of the board meeting should summarize the discussions, specify any decisions taken and state any reservations voiced by directors.
E. Evaluation
16
a. Initiating by the Chairman of the Board, the Board should periodically evaluate the size, composition and performance of the Board, and those of its specialized committees, at least every second year.
b. The evaluation process should have four objectives:
assessing how the board or the relevant committee operates;
checking that the important issues are suitably prepared and discussed; evaluating the actual contribution of each director's work, the director's
presence at board and committee meetings and his constructive involvement in discussions and decision-making; and
checking the board's or committee's current composition against the board's or committee's desired composition.
c. Non-executive directors should regularly assess their interaction with the CEO and the Senior Management.
d. The evaluation is to be organized by an external and independent advisor with experience in conducting board evaluations. The evaluation of the Board‟s work is conducted by all board members on an anonymous basis via a questionnaire. e. The overall results from the evaluation of the Board are to be presented to and
discussed openly by the Board in order to learn from the process.
f. The performance of each individual director should be evaluated before his/her possible reappointment.
g. If it appears from the evaluation that the composition and/or functioning of the board of directors, as well as the contributions of the individual directors, are no longer adequate to achieve the objectives of the company in the most efficient manner, it is the responsibility of the Chairman of the Board to take the necessary measures to rectify this. The GSM will be informed and invited to take the appropriate decisions.
F. Remuneration
17
b. Non-executive directors receive only a fixed fee linked to their presence in the board meetings.
c. Only non-management directors shall receive compensation for directorship services. Executive directors are solely remunerated for their role as executive managers.
IV. Specialized Committees of the Board
Given that Esko is division of Danaher, there are no board committees at the level of Esko. Board committees are operated only at the level of Danaher. In particular, Danaher’s board has three committees, which are the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. The provisions set below are applicable to Esko as a standing alone company.
The Board puts in place two committees to support the Board in carrying out its responsibility: an Audit Committee and a HR& Remuneration Committee. Both the committees operate within the board and only have an advisory capacity. The Board must make sure that a work description of the tasks and responsibilities of the committees is present. In addition, the Board may choose to appoint ad hoc committees. The ad hoc committees are temporary committees which are established to solve/elaborate on specific issues and to make the work of the Board more effective.
A. Audit Committee
The Audit Committee is appointed by the Board to assist the Board in its oversight of: 1) the integrity and accuracy of the financial statements of the company; 2) the internal controls and risk management systems including the company‟s compliance with legal and regulatory requirements; 3) the performance of the company‟s internal audit process; 4) the qualification, performance and independence of the external auditor.
a. Composition and organization
18
2. The Audit Committee shall consist of at least three members. All the members of the Audit Committee should fulfill the independency criteria as set in Sec.III.A.4 of this charter.
3. The members of the Audit Committee should possess sufficient relevant expertise, namely in matters of finance, accounting and audit.
4. The Chairman of the Board should not chair the Audit Committee.
5. The Audit Committee should regularly (at least every two to three years) review its terms of reference and its own effectiveness and recommend any necessary changes to the Board.
b. Meetings and committee resources
Meetings
1. The Audit Committee shall meet at least twice per year when convened by its chairman. The meetings shall preferably coincide with the key dates of the company‟s financial reporting cycle.
2. The Audit Committee may request other parties to attend a meeting of the Committee as invitees, including:
i. the external auditor;
ii. relevant management staff of the company; iii. relevant employees of the company.
3. The chairman of the Audit Committee shall set the agenda of each meeting based on this charter and the input from the members of Audit Committee and invitees of the meeting.
4. The Chairman of the Board and the CEO are permanent invitees to each meeting of the Audit Committee.
5. An executive session, whereby the Audit Committee meets with each invitee separately, shall be put on the agenda of each meeting. The executive session is carried out when deemed necessary by the Audit Committee.
19
or improvement is needed, and making recommendations as regards the steps to be taken. The chairman of Audit Committee is responsible for distributing the minutes of the meetings to all members of the Board.
Committee Resources
7. As required by Sec.301 of SOX, the company shall provide the Audit Committee with all necessary support, including access to and the use of the company‟s records, physical properties, management staff, employees, independent auditors, attorneys and consultants, as the committee deems necessary to discharge its responsibilities.
8. As required by Sec.301 of SOX, the Audit Committee should be provided with appropriate funding, as determined by the Audit Committee, for payment of remuneration to the external auditors and any external advisers employed by the Audit Committee.
c. Responsibilities
In relation to financial reporting
The Audit Committee shall, on a non exhaustive basis, review:
1. the company‟s quarterly and annual financial reports for integrity, accuracy and fairness of presentations, prior to the Board approval and their filing with appropriate authorities or their release to third parties, in conjunction with the external auditor and the Senior Management;
2. the annual certification process of financial reports for the CEO and CFO; 3. the relevance and consistency of accounting policies and practices used in
the company, and any changes in these accounting policies and practices; 4. the accounting judgments made by the management that may significantly
affect the financial results of the company;
5. the method used to account for significant and unusual transactions in the company;
20
7. the disagreements between the management and the external auditor, and the resolutions thereto.
In relation to internal controls and risk management
1. The Audit Committee shall review and discuss with the Senior Management:
i. the disclosure made by the CEO and /or the CFO, if any, during the certification process of financial reports regarding:
all significant deficiencies and material weakness in the design or operation of internal controls which could adversely affect the financial reporting process in internal controls; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer‟s internal controls.
ii. management‟s conclusions about the effectiveness of the internal control system and procedures for financial reporting, and any significant changes and any corrective actions to the internal control. iii. management‟s annual internal control report as included in the
annual report, and the attestation report from the external auditor. iv. The Audit Committee should ensure procedures are established
for the receipt, retention, and treatment of complaints received by the company regarding accounting, internal controls, or auditing matters; and
for confidential, anonymous submission by employees regarding questionable accounting or auditing matters.
Associates of Danaher can submit such complaints through www.danaherintegrity.com
21
properly identified, managed and disclosed according to the framework approved by the Board. In conjunction with the Senior Management, the Audit Committee shall review the procedures and efforts made by the management to ensure compliance with existing legislation and regulation. 3. The chairman of the Audit Committee and the Chairman of the Board are informed by CEO and CFO, as soon as they are aware of any material
violation of any existing legislation and regulation, and are informed of the
actions the management will undertake to remedy the violations. The Audit Committee will be informed by the CFO of any changes in legislation and regulation, and the proposed response by the management to the new requirements.
4. The chairman of the Audit Committee and the Chairman of the Board will be provided with an overview of significant litigations to which the company is a party by the Senior Management or legal counsel, including management‟s assessment thereof.
In relation to the internal audit process
1. The Audit Committee should evaluate periodically the efficiency of the internal auditing process.
2. The need for an independent internal audit function should be reviewed at least annually.
The internal audit function of Esko is currently mandated to the Finance Department. The CFO of Esko is responsible for reviewing the internal audit process.
In relation to the external auditor
1. The Audit Committee shall
22
Given that Esko is a division of Danaher, the rights to appointment and dismissal of external auditor is reserved to the Audit Committee of Danaher. As required by Sec.301 of SOX, the Audit Committee of Danaher has “the sole authority to appoint, retain, compensate, evaluate and terminate the independent auditor, subject, if applicable, to shareholder ratification”. More details can be found in Charter of the Audit Committee of the Board of Directors of Danaher Corporation (Page 2, revised version in 2007). Moreover, according to Danaher’s policy, the CFO of Danaher’s local entity is responsible for direct contact with the external auditor which is appointed by Danaher.
However, in the case that Esko is a standing alone company, the rights to appointment and dismiss the external auditor are reserved to the GSM under the Belgian Law. The Audit Committee shall make proposals regarding the appointment and dismissal of the external auditor to the Board. .
ii. Review the qualifications of the external auditor and its auditing staff on the company‟s audit.
iii. Review audit scope, methodology, audit plan and fees of the external auditor for each fiscal year. The external auditor shall provide an update of the progress of the audit compared to plan on the impact on the fees, at appropriate intervals.
iv. Assess annually the independence and objectivity of the external auditor especially regarding “non-audit” services provided by the external auditor. The Audit Committee shall obtain and review the report from the external auditor describing its independence from its perspective.
23
vi. the dispositions by management of the suggestions made by the external auditors regarding improvement for the internal controls and risk management systems, and the financial reporting process.
2. The external auditor should report directly to the Audit Committee.
The external auditor directly reports to the Audit Committee of Danaher.
B. HR & Remuneration Committee
As part of the efforts to ensure the best possible management structure in Esko, a HR & Remuneration Committee is established in order to ensure that: 1) competitive remuneration and reward schemes for Senior Management and key employees are in place; 2) the necessary management resources are available at all levels within Esko, including Board of Directors and Senior Management; 3) the required resources and competencies for the further development of Esko are available.
a. Composition and organization
1. The chairmanship and the members of the HR & Remuneration Committee are appointed by the Board.
2. The HR & Remuneration Committee shall consist of at least three members. All the members should fulfill the independency criteria set in set in Sec.III.A.4 of this charter.
3. The senior manager in charge of HR has independent access to the chairman of the HR & Remuneration Committee.
4. The HR and Remuneration Committee should regularly (at least every two to three years) review its terms of reference and its own effectiveness and recommend any necessary changes to the Board.
b. Meetings and committee resources
1. The HR & Remuneration Committee shall meet at least twice a year when convened by its chairman.
24
3. In exceptional situations and under its autonomous responsibility, the HR & Remuneration Committee may invite the following parties to participate a meeting of the Committee:
i. relevant employees of the company; ii. relevant external advisors or consultants; iii. other board members of the company.
4. The CEO can participate the voting of the HR & Remuneration Committee except in cases where issues concerning the CEO are dealt with. The CEO can be assisted by the senior manager in charge of HR.
5. Minutes should be made for each committee meeting. The chairman of the HR & Remuneration Committee should ensure the minutes are distributed to all members of the Board. The chairman of the committee should also inform about the work of the HR & Remuneration Committee on the first-coming board meeting after each meeting of the committee.
6. The HR & Remuneration Committee are entitled to seek external professional advice at the company's expense after informing the Chairman of the Board.
c. Responsibilities
In relation to the remuneration schemes of the CEO, the Senior Management, and key employees
The HR & Remuneration Committee shall:
1. make proposals to Board regarding the remuneration level and the remuneration policy for non-executive directors, the CEO and Senior Management;
2. review remuneration of the CEO and the Senior Management, and ensure the their remuneration is:
i. linked to the performance of the company and his/her individual performance;
25
iii. designed to stimulate sustainable and profitable growth of the enterprise rather than entail overly risks-seeking behavior;
iv. fair to the individual and the company, and that failure is not rewarded.
3. review the incentive schemes for the company‟s key employees, and advise Senior Management in the implementation hereof;
4. monitor whether main objectives of the company‟s formal and transparent Remuneration and Benefits Policy are met and whether they correspond to the most important challenges related to human resources. These main objectives are:
Attract and retain key talent; Identify and retain high performers; Motivate and stimulate our employees;
Ensure skills are used effectively and enhance the overall efficiency and financial performance.
In relation to the current and future need of management resources
The HR & Remuneration Committee shall:
1. ensure that Senior Management at all times possesses the necessary competencies for the implementation of the planned strategy;
2. draw up and recommend to the Board the appointment procedures for board members , the CEO, and Senior Management;
3. Oversee the succession plan for the CEO, and review the succession plans of the Senior Management in conjunction of the CEO;
4. identify and nominate candidates for vacant mandates of directors, the CEO and the Senior Management to the Board;
5. advise on proposals for appointment originating from shareholders; 6. assess the size and composition of the Board periodically and make
26
7. set up clear procedures regarding the evaluation, such as the parameters to be used and the evaluation criteria;
8. evaluate the performance of the CEO, and the performance of the Senior Management in conjunction with the CEO. The HR & Remuneration Committee may be assisted by external experts in this matter;
9. function as the CEO‟s sparring partner in his assessment of competencies and resources in the second and third management layer. In particular, the committee should be informed who the High Potentials are in the company, and what their needs of training are.
10. assist the CEO in cases of planned major changes in the second management layer;
11. assist the Senior Management with uncovering of potential needs for further competencies and/or resources in the company, and ensure that these needs are covered;
12. assist the Senior Management with best practices in case they have to deal with major social conflicts.
V. CEO and the Senior Management A. CEO
a. Appointment
1. The CEO is appointed by the Board, and if applicable, at the recommendations of the HR & Remuneration Committee;
2. The Board has the authority to either appoint a general manager or assign one of the board members as the managing director.
b. Responsibilities
1. The CEO is entrusted by the Board with daily management of the company and is responsible and accountable to the Board for the discharge of its responsibilities.
27
3. The CEO should provide to the Board with accurate and timely information necessary for the Board to carry out its duties, such as information regarding all aspects of the operational leadership and particularly the evolution of the financial results.
4. The CEO is required to arrange his personal and business affairs so as to avoid direct and indirect conflicts of interest with the company. 5. The CEO, in conjunction with the CFO, should inform the Chairman of
the Board and the chairman of the Audit Committee, any material violation of any law or regulatory requirements and the actions the management undertake to remedy the violations.
6. In relation to the annual report certification, the CEO, in conjunction with the CFO, should:
i. Ensure the annual and periodic financial statements and other financial information fairly present all material aspects of the company‟s financial condition and results of operation;
ii. Be responsible for establishing and maintaining the internal control procedures for financial reporting;
iii. Evaluating the effectiveness of the internal controls 90 days prior to the financial reports filing date;
iv. Disclose to the Audit Committee and the external auditor about: all significant deficiencies and material weakness in the design
or operation of internal controls that could adversely affect the financial reporting process;
any fraud, whether or not material, that involves management or other employees who have a significant role in the issuer‟s internal controls.
28 c. Remuneration and performance evaluation
1. The Board should evaluate the performance of the CEO. If applicable, the Board should be assist by the HR & Remuneration Committee. 2. The Board decides on the remuneration policy and the remuneration
level of the CEO, and if applicable, at the proposal of the HR & Remuneration Committee.
3. The CEO shall not attend the meeting of the HR & Remuneration Committee when the compensation of the CEO is dealt with.
Given that Esko is a division of Danaher and there are no board committees on Esko level, this rule is temporarily not applicable to Esko. Nevertheless, the CEO should not be involved in any meetings of the Board in which the remuneration of CEO is discussed.
4. The severance pay awarded to the CEO should adhere to the Belgian Law.
B. The Senior Management a. Appointment
1. The members of the Senior Management are appointed by the Board on the advice of the CEO. If applicable, the Board should also be assisted by the HR & Remuneration Committee.
b. Responsibilities
1. The Senior Management directly reports to the CEO and assist the CEO with daily management of the company and the execution of the Board‟s decisions.
2. Transactions between the company and its Senior Management should take place at arms' length so as to avoid direct and indirect conflicts of interest with the company.
29
1. The Board, in conjunction with the CEO, evaluates the performance of the Senior Management. If applicable, the Board should be assisted by the HR & Remuneration Committee.
2. The Board decides on the remuneration policy and the remuneration level of the Senior Management. If applicable, the Board should be assist by the HR & Remuneration Committee.
3. The severance pay awarded to the Senior Management should adhere to the Belgian Law.
VI. Code of Conduct
Esko fully complies with the Stands of Conduct set by Danaher. For more details, please refer to Danaher‟s Standards of Conduct as revised in 2009. The document can be accessed through:
