Recommendations for Corporate Governance from the Committee on Corporate Governance.
In December 2020, the version of Recommendations for Corporate Governance applicable from the financial year 2021 was published. Topdanmark has a defined approach to each of the items.
See Topdanmark's approach under each item
1.1. Communication with the company's shareholders, investors and other stakeholders
1.1.1. The Committee recommends that the management through ongoing dialogue and interaction ensures that shareholders, investors and other stakeholders gain the relevant insight into the company's affairs, and that the board of directors obtains the possibility of hearing and including their views in its work.
Topdanmark recognises the value and necessity of an open dialogue with its shareholders, investors and other stakeholders, and therefore it is giving, and has for many years given, high priority to its investor relations and communication activities.
Topdanmark is striving to be active and proactive towards investors at home and abroad by using information and communication channels such as
• Investor meetings
• Conference calls
• Web casts
• Investment and insurance conferences.
Topdanmark holds around 150-200 investor meetings each year. Presentations from the investor meetings are available on the Company's website.
When possible and relevant, Topdanmark is in continuous dialogue with proxy advisors. Such dialogue with proxy advisors is typically in connection with the preparation of the company’s annual general meeting.
On an on-going basis, the Board of Directors is informed of the company’s dialogue with shareholders, investors and other stakeholders, typically in connection with the Board of Director’s processing of the company’s financial statements.
1.1.2. The Committee recommends that the company adopts policies on the company’s relationships with its shareholders, investors and if relevant other stakeholders in order to ensure that the various interests are included in the company’s considerations and that such policies are made available on the company’s website.
Topdanmark has identified clear guidelines for the company's relationship with its main stakeholders (shareholders, customers, employees). Topdanmark has also adopted policies for its investor relations activities. Policies, procedures etc. are available at the company’s website. Read more about Topdanmark's objectives, goals and strategies, Topdanmark's customer-oriented values, Topdanmark's management values and Topdanmark's Investor Relations policy.
1.1.3. The Committee recommends that the company publishes quarterly reports.
Topdanmark publishes quarterly reports.
1.2. The General Meeting (AGM)
1.2.1. The Committee recommends that the board of directors organises the company’s general meeting in a manner that allows shareholders, who are unable to attend the meeting in person or are represented by proxy at the general meeting, to vote and raise questions to the management prior to or at the general meeting. The Committee recommends that the board of directors ensures that shareholders can observe the general meeting via webcast or other digital transmission.
Topdanmark convenes the general meeting in accordance with legislation and the company's articles of association. Furthermore, about one month prior to the general meeting, the company sends a written invitation to all the Danish and foreign shareholders who had requested it and at that time were inscribed or registered by name, thus endeavouring to ensure the largest possible shareholder attendance at its general meetings.
Prior to the general meeting, shareholders can vote i.a. via the investor portal at the company’s website, and they can ask questions to management or make submissions to the individual items on the agenda via Topdanmark’s share administration.
Since 2020, Topdanmark’s annual general meeting has been held as a fully virtual general meeting at which the shareholders have been able to vote and ask questions to management.
At the annual general meeting 2021, an amendment to the Articles of Association was adopted authorising the Board of Directors to determine that the company’s general meeting should be held as a fully virtual general meeting. The Board of Directors has decided that, as a rule, Topdanmark’s general meeting will be held as a fully electronic general meeting, unless the Board of Directors specifically decides otherwise. The reason behind the decision is to give as many shareholders as possible the opportunity to participate at the general meeting on equal terms.
Topdanmark’s annual general meeting is transmitted live via a webcast on the company’s website and can be watched by both shareholders as well as the company’s other stakeholders. The transmission is also available on the company’s website after the annual general meeting.
1.2.2. The Committee recommends that proxies and postal votes to be used at the general meeting enable the shareholders to consider each individual item on the agenda.
Topdanmark is only requesting proxies for one specific general meeting.
Via proxy or postal vote, shareholders may vote for or against or abstain from voting for each individual item on the agenda, as well as vote for or abstain from voting for the election of members to the Board of Directors and for the appointment of accountant.
A proxy/postal vote form is sent to all shareholders who have requested it and are inscribed or registered by name prior to the annual general meeting. Electronic proxy/postal vote may be cast on Topdanmark’s website or on Euronext Securities’ website. Furthermore, proxy/postal vote forms are available for downloading from Topdanmark's website.
1.3. Takeover bids
1.3.1. The Committee recommends that the company has a procedure in place in the event of takeover bids, containing a “road map” covering matters for the board of directors to consider in the event of a takeover bid, or if the board of directors obtains reasonable grounds to suspect that a takeover bid may be submitted. In addition, it is recommended that it appears from the procedure that the board of directors abstains from countering any takeover bids by taking actions that seek to prevent the shareholders from deciding on the takeover bid, without the approval of the general meeting.
The Board of Directors has adopted a contingency plan for uninvited takeover bids. The plan is revised regularly and at least once a year.
Topdanmark's contingency plan in the event of an uninvited takeover bid is intended to allow shareholders to consider the terms offered on an accurate and well-informed basis.
Except for the authorisations granted in Articles 4A-4G to increase the company's share capital, Topdanmark's articles of association have no provisions enabling the Board of Directors to establish measures to resist an attempted takeover unless accepted by the shareholders.
Topdanmark believes that a share price reflecting the future earnings potential is the only actual protection against an uninvited takeover bid.
1.4. Corporate Social Responsibility
1.4.1. The Committee recommends that the board of directors adopts a policy for the company’s corporate social responsibility, including social responsibility and sustainability, and that the policy is available in the management commentary and/or on the company’s website. The Committee recommends that the board of directors ensures compliance with the policy.
Topdanmark is co-signer of the UN Global Compact and has implemented the Global Compact’s 10 principles for human rights, workers’ rights, climate, environment and anti-corruption into the policies, guidelines and procedures of the Group.
The Board of Directors has adopted an overall Code of Conduct consisting of a number of principles that reflect the behaviour which the Board of Directors want to promote in Topdanmark and with Topdanmark’s employees, as well as a Policy for Sustainability which set the overall framework, objectives and strategy for the Topdanmark Group’s work with and position on corporate responsibility and sustainability. In connection with the Code of Conduct and the Policy for Sustainability, Topdanmark has adopted a number of separate policies which each concerns delimited subject areas, including Climate and environmental policy, Policy for anti-corruption, Policy for responsible investments, Policy for active ownership, Policy for diversity in executive functions, Policy for diversity in the Board of Directors, Loss prevention policy, Policy for human rights, Policy for customer complaints, data ethics guidelines as well as ethical principles for artificial intelligence, which are all available on the company’s website.
The status of Topdanmark’s work within the field of sustainability is reported to the Board of Directors on an ongoing basis and at least once a year. Likewise, the Board of Directors is annually presented with and approves Topdanmark’s Sustainability Report and ESG Fact Book. The Sustainability Report includes, among other things, information on the development in Topdanmark’s work within the field of sustainability, including a thorough description of the objectives, as well as the activities and results of the year. The ESG Fact Book includes sustainability data. In addition, Topdanmark publishes a Carbon Disclosure Report (CDP) as well as Task Force on Climate-related Financial Disclosure (TCFD). All four reports are available on the company’s website.
1.4.2. The Committee recommends that the board of directors adopts a tax policy to be made available on the company’s website.
Topdanmark’s policy in relation to tax liabilities is included as part of the Code of Conduct adopted by the Board of Directors, and it is available on the company’s website.
2.1. Overall tasks and responsibilities
2.1.1. The Committee recommends that the board of directors in support of the company’s statutory objects according to its articles of association and the long-term value creation considers the company’s purpose and ensures and promotes a good culture and sound values in the company. The company should provide an account thereof in the management commentary and/or on the company's website.
Topdanmark’s Board of Directors has defined Topdanmark’s overall purpose. A statement about Topdanmark’s purpose, objective, strategy, position, operational goals and stakeholders is available on the company’s website.
Topdanmark wants to be a responsible and reliable company– for the company’s customers, shareholders, employees, suppliers, partners and the society in which the company operates. Topdanmark wants to build trust to all the company’s stakeholders, and always endeavours to run its business in a responsible, ethical and lawful manner. To support this, the Board of Directors has adopted a Code of Conduct consisting of a number of principles that reflects the conduct which the Board of Directors wants to promote in Topdanmark and with the employees in Topdanmark.
2.1.2. The Committee recommends that the board of directors at least once a year discusses and on a regular basis follows up on the company’s overall strategic targets in order to ensure the value creation in the company.
Topdanmark's Board of Directors holds an annual Board seminar to discuss and establish, among other things, the Company's overall strategy including how to ensure future value creation. Furthermore, the Board of Directors monthly receives report on the status of Topdanmark’s strategic goals.
2.1.3. The Committee recommends that the board of directors on a continuously basis takes steps to examine whether the company’s share and capital structure supports the strategy and the long-term value creation in the interest of the company as well as the shareholders. The Committee recommends that the company gives an account thereof in the management commentary.
For a number of years, Topdanmark was working towards gradually removing the restrictions on, for example, voting rights. See Corporate Governance on the website for a historical review of Corporate Governance related initiatives taken by the Company since 1995.
The last restrictions on voting rights and the voting ceiling set out in the articles of association were removed at Topdanmark's 2001 annual general meeting. Therefore, today the rticles of association set out no restrictions on voting rights.
The Board of Directors has adopted a policy for capital structure and regularly ensures that Topdanmark's capital and share structures continue to be appropriate and support the company’s strategy and long-term value creation, for example, when a quarterly report is published and in connection with the Board of Directors' work with Topdanmark's ORSA (Own Risk and Solvency Assessment). Information on Topdanmark's capital and earnings distribution model is updated on the website when the quarterly reports are published and also described in the management's review in the Annual Report.
2.1.4. The Committee recommends that the board of directors prepares and on an annual basis reviews guidelines for the executive management, including requirements in respect of the reporting to the board of directors.
As a financial services company, Topdanmark is subject to detailed regulatory requirements on the distribution of duties between the Board of Directors and the Executive Board, and on the reporting from the Executive Board to the Board of Directors. Of course, Topdanmark meets these requirements and the Board of Directors has adopted a wide range of policies and guidelines for the Executive Board, including Reporting policy and guidelines.
Topdanmark’s rules of procedure lay out the guidelines for the work of the Board of Directors as well as the segregation of duties between the Board of Directors and the Executive Board.
The Board of Directors has adopted a work plan (an annual wheel) in order to ensure appropriate planning of the tasks of the Board of Directors. The plan is revised regularly and at least once a year.
In the same way, the rules of procedure for the Board of Directors is revised regularly and at least one a year. The review of the work plan and the rules of procedure are part of the work plan of the Board of Directors.
2.2 Members of the board of directors
2.2.1. The Committee recommends that the board of directors, in addition to a chairperson, appoints a vice chairperson, who can step in if the chairperson is absent and who can generally act as the chairperson’s close sparring partner.
There is and has always been a Deputy Chairman on Topdanmark's Board of Directors. The Deputy Chairman replaces the Chairman in the Chairman's absence and/or incapacity. The Deputy Chairman attends chairmanship meetings with the Executive Board prior to each Board meeting in order, among other things, to be an effective sparring partner for the Chairman.
The responsibilities and duties of the Chairman and Deputy Chairman are described in the rules of procedure of the Board of Directors.
2.2.2. The Committee recommends that the chairperson in cooperation with the individual members of the board of directors ensures that the members up-date and supplement their knowledge of relevant matters, and that the members’ special knowledge and qualifications are applied in the best possible manner.
As a minimum once a year, the board members’ special knowledge and competencies are mapped in connection with the Board of Director’s annual self-assessment. The Chairman is responsible for the board members’ special knowledge and competencies being applied in the best possible way i.a. by inciting and supporting the board members, in areas in which they possess special competencies, on behalf of the board, when relevant, to enter into a closer dialogue with and act as a sparring partner to the company's executive management and other management.
The Board of Directors evaluates, at least once a year, when assessing itself, its composition and, based on the Company's current needs, the need for renewal/ supply of new skills, including whether, specifically or generally, there is a need for supplementary training of the existing Board members.
2.2.3. The Committee recommends that if the board of directors, in exceptional cases, requests a member of the board of directors to take on special duties for the company, for instance, for a short period to take part in the daily management of the company, the board of directors should approve this in order to ensure that the board of directors maintains its independent overall management and control function. It is recommended that the company publishes any decision on allowing a member of the board of directors to take part in the daily management, including the expected duration thereof.
Neither the chairman nor other board members do - not even briefly - participate in the day-to-day management of the company, nor does the chairman perform other special tasks for the company besides the duty as chairman of the Board of Directors or member of the board respectively, noting that the employee-elected board members of course perform their day-to-day duties as employees at Topdanmark.
3.1 Composition
3.1.1. The Committee recommends that the board of directors on an annual basis reviews and in the management commentary and/or on the company’s website states
The Board of Directors has addressed the composition and qualifications of the Board of Directors in "Policy for diversity in the Board of Directors". The policy is available on the company’s website.
Topdanmark considers it important to have a small and active Board of Directors. The Board of Directors believes that by imposing very specific requirements on its members in advance, it risks to prevent the election of evidently qualified Board candidates if they do not fully meet the requirements.
Topdanmark wishes to make a specific decision on each Board candidate based upon an overall consideration of the candidate's qualifications as compared with the Company's business model and associated risks, present needs and the composition of the rest of the Board of Directors.
Topdanmark believes that in a company like Topdanmark, between them, its Board members should possess competencies within organisation, strategic management, insurance operations, reinsurance, long-tail business, financial and insurance reporting, general statistics, risk management and assessment, sales in the private and professional markets, marketing/branding, outsourcing, finance, own funds, solvency and minimum capital requirements, rules for internal models, auditing, financing, investment, statutory limits, compliance, IT and IT security, digitalisation, recruitment/HR as well as sustainability. With its current composition, Topdanmark's Board of Directors possesses all these skills.
The Board of Directors evaluates, at least once a year, when assessing itself, its composition and, based on the Company’s current needs, the need for renewal/supply of new skills, including whether, specifically or generally, there is a need for supplementary training of the existing Board members.
Compulsory introduction training is given to Board members elected by employees after each election of employee representatives. As of 1 January 2017, new requirements to compulsory basic training for Board members at financial businesses came into force. Topdanmark will ensure that the requirements are met for new Board members. Additionally, dependent on each Board member's qualifications and needs, all newly elected Board members receive targeted introduction to Topdanmark and supplementary training, if required. Furthermore, training sessions are held regularly at Board meetings and seminars.
As the members of the Board of Directors are eligible for election each year, information on the actual criteria for the appointment of the board members, as well as information on the board members’ profiles and qualifications are published annually when the annual general meeting is convened. Furthermore, this information is available in the management's review in the Annual Report which also includes a description of Topdanmark's recruitment philosophy, necessary skills and diversity, as well as the Board of Director’s assessment of to what extent the Board of Directors currently possesses these competencies. Finally, the information is available on the company's website. The information on the website is updated regularly and at least quarterly.
3.1.2. The Committee recommends that the board of directors on an annual basis discusses the company’s activities in order to ensure relevant diversity at the different management levels of the company and adopts a diversity policy, which is included in the management commentary and/or available on the company's website.
Topdanmark believes that diversity provides business value and that it is important that employees, irrespective of gender, nationality, religion or other characteristics, have equal access to executive positions at all levels.
In accordance with legislation, the Board of Directors has set target figures for the gender composition of the Board of Directors and adopted ”Policy for diversity in the Board of Directors”, which includes target figures for the underrepresented gender, and “Policy for diversity and the underrepresented gender in executive functions in Topdanmark”. The Board of Directors meets its goal and the statutory definition of an equal gender distribution. "Policy for diversity in the Board of Directors" and "Policy for diversity and the underrepresented gender in executive functions in Topdanmark" are published on the company's website.
Topdanmark has also signed up to the UN Global Compact intended to ensure, among other things, the prevention of discrimination in businesses.
In the management's review and in the company’s Sustainability Report published on the company’s website, Topdanmark explains both its objective, initiatives and the progress made in achieving them.
The Board of Directors discusses regularly, and at least once a year, the company’s activities of diversity and the current state of diversity.
3.1.3 The committee recommends that candidates for the board of directors are recruited based on a thorough process approved by the board of directors. The Committee recommends that in assessing candidates for the board of directors – in addition to individual competencies and qualifications – the need for continuity, renewal and diversity is also considered.
The Board of Directors regularly discusses its composition, especially when the annual evaluation is made. The Board of Directors takes into consideration whether it possesses the necessary and relevant skills, competencies, diversity etc. needed to operate the company. To the extent there is a need for one or more new Board candidates, the Board of Directors analyses the necessary and relevant skills and competencies, and on this basis it starts a process held by the Nomination Committee of the Board of Directors to find one or more relevant candidates. External assistance is used in the recruitment process when needed.
The Board of Directors has adopted "Policy for diversity in the Board of Directors" which is available on the company’s website.
3.1.4. The Committee recommends that the notice convening general meetings, where election of members to the board of directors is on the agenda - in addition to the statutory items - also includes a description of the proposed candidates’
The proposal made by the Board of Directors for Board candidates is accompanied by a detailed description of each candidate, stating their CVs including information on their education, current and previous occupation, industry experience, competencies and qualifications, other executive functions in Danish and foreign companies, demanding organisational tasks and offices held and whether the candidate is considered to be independent.
3.1.5. The Committee recommends that members to the board of directors elected by the general meeting stand for election every year at the annual general meeting, and that the members are nominated and elected individually.
All of Topdanmark's Board members elected by the annual general meeting stand for election each year. The candidates are nominated and elected individually.
3.2. The board of director’s independence
3.2.1. The Committee recommends that at least half of the members of the board of directors elected in general meeting are independent in order for the board of directors to be able to act independently avoiding conflicts of interests.
In order to be independent, the member in question may not:
Even if a member of the board of directors does not fall within the above-stated criteria, the board of directors may for other reasons decide that the member in question is not independent.
Ricard Wennerklint, Petri Niemisvirta and Morten Thorsrud, members of the Board of Directors, represent the interests of a controlling shareholder. Consequently, these three members of the Board of Directors do not meet the definition of independence set out by the Committee on Corporate Governance. Jens Aaløse, Cristina Lage and Maria Hjorth are independent.
Thus, Topdanmark does meet the recommendation of item 3.2.1 that at least half of the members of the Board of Directors elected by the general meeting should be independent persons.
3.2.2. The Committee recommends that members of the executive management are not members of the board of directors and that members retiring from the executive management does not join the board of directors immediately thereafter.
No members of Topdanmark's executive board are members of the Board of Directors. No members of the Board of Directors have previously been executive officers in Topdanmark.
3.3. Members of the board of directors and the number of other managerial duties
3.3.1. The Committee recommends that the board of directors and each of the members on the board of directors, in connection with the annual evaluation, cf. recommendation 3.5.1., assesses how much time is required to perform the board duties. The aim is for the individual member of the board of directors not to take on more managerial duties than the board member in question is able to perform in a satisfactory manner.
Topdanmark believes that it is up to each individual Board member to decide how many other positions they can handle and that the amount of managerial work varies significantly from company to company. Therefore, each Board member is responsible for not taking on more functions than he/she can handle in a satisfactory way.
Regularly and specifically when evaluating itself once a year and when nominating candidates for the annual election of Board members, the Board of Directors evaluates, based on, inter alia, an overboarding assessment, whether each Board member/candidate has been and will continue to be able to allocate sufficient time and attention to perform his/her Board duties in Topdanmark. The evaluation of overboarding is based on the guidelines prepared by ISS and additionally, a subjective evaluation is made. None of Topdanmark’s Board members are considered to be overboarded.
3.3.2. The Committee recommends that the management commentary, in addition to the statutory requirements, contains the following information on the individual members of the board of directors:
The management’s review, Topdanmark's website and the notice convening the annual general meeting disclose information on, among other things, each Board member’s – and Candidate’s – position, age, gender, independence, date of joining the Board, his/her other executive functions and demanding organisational tasks, competencies and qualifications of relevance to the company, as well as their attendance rate.
The period of election for Board members elected by the annual general meeting in Topdanmark is one year. The date of expiry of the election period is self-explanatory.
The management’s review and/or the Annual Report, as well as the Remuneration Report contain information of the number of shares, options, warrants etc. in Topdanmark and Topdanmark’s subsidiaries owned by the individual Board members and the changes in these holdings during the financial year. The transactions of the members of the Board of Directors and the Executive Management in Topdanmark shares, options etc. are reported to the Danish FSA in accordance with current rules.
3.4. Board Committees
3.4.1. The Committee recommends that the management describes in the management commentary:
In addition, it is recommended that the board committees’ terms of reference are published on the company’s website.
Topdanmark has set up a joint Audit Committee in accordance with the rules of the Danish Audit Act.
Topdanmark has set up a joint Remuneration Committee in accordance with the relevant rules of the Danish Executive Order on wage policy and remuneration in insurance companies and insurance holding companies.
Topdanmark has set up a Nomination Committee for the whole Topdanmark Group.
The terms of reference for the committees, their rules of procedure and most important activities have been published on Topdanmark's website. The website also discloses information on the number of meetings held by the committees, the names, qualifications and independence of the members, the Chairmen of the committees and the members with special qualifications, when specifically required. The information is also disclosed in Topdanmark’s annual Corporate Governance Report which is part of the management’s review.
3.4.2. The Committee recommends that board committees solely consist of members of the board of directors and that the majority of the members of the board committees are independent.
Topdanmark's Board Committees comprise solely of board members and the board members considered most suitable by the Board of Directors to attend to the function concerned.
The Audit Committee consists of three members of whom two members meet the definition of independence set out by the Committee on Corporate Governance, thus Topdanmark meets the recommendation for this committee.
The Remuneration Committee has three members, and the Nomination Committee has two members. These committees comprise Topdanmark's Chairmanship and in respect of the Remuneration Committee, also a Board member elected by employees in accordance with the statutory rules. Topdanmark's Chairmanship comprises a Chairman who represents the interests of a controlling shareholder and a vice Chairman who is independent. Consequently, the majority of the members of the Remuneration and Nomination Committee is not independent.
The Board of Directors believes that it has greater value for Topdanmark to ensure that the Board Committees comprise those persons who are best qualified and to ensure a balance in the committees between members attending to the interest of Topdanmark’s controlling shareholder and members who are independent and able to enter into critical dialogue with the representatives of the controlling shareholder in the committees, rather than ensuring that the majority of the members of a small committee meets the definition of independence set out by the Committee on Corporate Governance.
3.4.3. The Committee recommends that the board of directors establishes an audit committee and appoints a chairperson of the audit committee, who is not the chairperson of the board of directors. The Committee recommends that the audit committee, in addition to its statutory duties, assists the board of directors in:
If the board of directors, based on a recommendation from the audit committee, decides to set up an internal audit function, the audit committee must:
Topdanmark has set up a joint Audit Committee for the Topdanmark Group in accordance with the rules of the Danish Audit Act. All members of the Audit Committee are members of the Board of Directors.
The Chairman of the Board of Directors, Ricard Wennerklint, is also Chairman of the Audit Committee. Thus, Topdanmark does not meet the recommendation that the Chairman of the Audit Committee should be different from the Chairman of the Board of Directors.
Ricard Wennerklint has been a member of the Audit Committee since 2017 and Chairman since 2018. Ricard Wennerklint was elected Chairman of the Board of Directors in 2019. The additional two members of the Audit Committee joined the Board of Directors and the Audit Committee at the annual general meetings in 2019 and 2022 respectively. The Board of Directors assesses that in this situation, inter alia, to ensure the right continuity, it is in the best interest of Topdanmark to have Ricard Wennerklint as the Chairman of the Audit Committee for a time, as well as Chairman of the Board of Directors for a time, although this implies that Topdanmark does not meet the recommendations from the Committee of Corporate Governance.
The Audit Committee monitors and reports to the Board of Directors on the correctness of the published financial information, material accounting policies, significant accounting estimates, related party transactions, Topdanmark’s control- and risk areas, and uncertainties and risks. The Audit Committee receives reports from Todanmark’s whistleblower scheme.
The Audit Committee is responsible for the continuous evaluation of the accountant appointed at the annual general meeting, and for each Audit Committee meeting, the committee receives reports on Topdanmark’s purchase of non-auditing services with the companies in the Sampo Group’s general meeting-appointed accountants.
Additionally, the work of Topdanmark's Audit Committee focuses on accounting processes and risk management as the review and approval of the accounts itself take place in the full board.
The Audit Committee reports to the Board of Directors at each Board meeting.
As a financial services company with more than 125 full-time employees Topdanmark shall have an internal audit function. The internal head of the audit function has been appointed by and refers to the Board of Directors.
The Audit Committee considers and formulates recommendations on the head of the internal audit function and on the budget of the internal audit function.
The Audit Committee ensures that a description exists for the internal audit function, and that adequate resources and competencies are allocated to the internal audit function. The description of the internal audit function and the budget for internal audit are evaluated by the Board of Directors on an annual basis.
At each Audit Committee meeting, the Audit Committee receives a report on the Executive Board's follow-up on the conclusions and recommendations of the internal and external audit functions.
The Board of Directors are in regular contact with both internal and external audit functions.
Internal and external audit report to the Board of Directors via audit protocols. Furthermore, internal audit always attends all Audit Committee meetings. External audit attends the Audit Committee meeting and board meeting in January and as needed.
Internal and external audit always attend the board meeting at which the annual results are reviewed and approved. In connection with this meeting, the Board of Directors holds a meeting with external and internal audit without the attendance of the Executive Board. In addition, the Audit Committee/the chairman of the Audit Committee holds a meeting with the auditors without the attendance of the Executive Board.
Based on a recommendation from the Audit Committee, the Board of Directors approves the audit engagement letter and the related fee, including the framework for external audit’s delivery of non-auditing services and audit plan with the budget for internal audit and external.
3.4.4. The Committee recommends that the board of directors establishes a nomination committee to perform at least the following preparatory tasks:
Topdanmark has set up a joint Nomination Committee for the entire Topdanmark Group. The nomination committee consists of Topdanmark's Chairmanship. The Chairman of the Board of Directors is Chairman of the Nomination Committee.
The Nomination Committee is responsible for the preparatory work for the decisions made by the Board of Directors on the structure and composition of the Board of Directors and the Executive Board. The Nomination Committee is also responsible for the annual assessment of the Board of Directors, the recruitment process in connection with new members of the Board of Directors and the Executive Board, succession planning for the Executive Board and senior management, the Executive Board’s policy for recruitment of senior management, and the preparation of a policy for diversity in the Board of Directors and in Executive functions in Topdanmark. The mentioned affairs are reported to the full board.
3.4.5. The Committee recommends that the board of directors establishes a remuneration committee to perform at least the following preparatory tasks:
Topdanmark has set up a joint Remuneration Committee for the entire Topdanmark Group.
The Board of Directors has adopted a working plan for the Remuneration Committee providing that the Committee submits the remuneration policy for the approval of the Board of Directors prior to the approval of the annual general meeting, submits proposals to the Board of Directors for remuneration of the Board of Directors, Executive Board, and the company’s additional management, decides the guidelines for the reporting on the observance of the remuneration policy, receives and reviews reporting on the observance of the remuneration policy, remuneration of the management of the risk organisation and the management of the part of the organisation that is otherwise in charge of control and audit, and reviews the Annual Report as well as the Remuneration Report in order to control the information on the remuneration of management.
Topdanmark’s remuneration policy is applicable to the Topdanmark Group in general.
As of the Annual Report for 2018, Topdanmark has published a Remuneration Report. The Remuneration Committee assists in its preparation.
3.5. Evaluation of the board of directors and the executive management
3.5.1. The Committee recommends that the board of directors once a year evaluates the board of directors and at least every three years engages external assistance in the evaluation. The Committee recommends that the evaluation focuses on the recommendations on the board of directors’ work, efficiency, composition and organisation, cf. recommendations 3.1.-3.4. above, and that the evaluation as a minimum always includes the following topics:
The Board of Directors regularly evaluates its work and the performance and achievements of the entire Board and each member, its cooperation with the Executive Board, the Chairman’s leadership of the Board of Directors, the composition of the Board of Directors, the work in the committees and the committee structure and organisation as well as the quality of the material submitted to the Board of Directors.
The Board of Directors carries out the self-assessment once a year.
Normally, the Board of Directors evaluates itself annually based on anonymous questionnaires regarding the work in the Board of Directors and the cooperation with the Executive Board, anonymous evaluation of the individual members of the Board of Directors and the Executive Board, and/or the possibility of individual interviews between the Chairman and each Board member and a questionnaire about each Board member’s competencies. The Chairman of the Board of Directors is in charge of the evaluation without the participation of the Executive Board.
The evaluation is included in the rules of procedure and the work plan of the Board of Directors.
The Board of Directors considers if external assistance is required and/or relevant in the specific situations. It is the opinion of the Board of Directors that external assistance should solely be included if it is considered to add extra value to the work of the Board, which cannot be obtained by the Board's evaluation without external assistance. For the evaluation year 2021/2022, the Board of Directors was assisted by an external consultancy in the evaluation of the Board of Directors.
3.5.2. The Committee recommends that the entire board of directors discusses the result of the evaluation of the board of directors and that the procedure for the evaluation and the general conclusions of the evaluation are described in the management commentary, on the company’s website and at the company’s general meeting.
The full Board of Directors discuss the result of the evaluation of the Board of Directors at the annual evaluation meeting.
The evaluation procedure and significant changes hereof are described in the Annual Report and on the company's website. The evaluation procedure, general conclusions and significant changes hereof will be described in the Management’s Review, on the company’s website and in the Chairman’s report on the annual general meeting.
3.5.3. The Committee recommends that the board of directors at least once a year evaluates the work and results of the executive management according to pre-established criteria, and that the chairperson reviews the evaluation together with the executive management. In addition, the board of directors should on a continuous basis assess the need for changes in the structure and composition of the executive management, including in respect of diversity, succession planning and risks, in light of the company’s strategy.
The Board of Directors evaluates the work and performance of the Executive Board on an ongoing basis and discusses this at least annually in connection with the annual board evaluation. These discussions are conducted without the presence of the Executive Board.
Furthermore, the Board of Directors discusses the need for changes to the structure and composition of the Executive Board, in light of the company’s strategy, policy for diversity etc., on an ongoing basis.
The Board of Directors and the Executive Board have established a procedure to which their cooperation is evaluated annually. The evaluation is based on, among other things, regular meetings between the CEO and the Chairman of the Board of Directors, reporting to the Board of Directors in connection with the annual board evaluation, and individual interviews between the Chairman and each Board member.
The evaluation is included in the rules of procedure and the work plan of the Board of Directors. It is described in both the Annual Report and on the Company's website.
4.1 Remuneration of the board of directors and the executive management
4.1.1. The Committee recommends that the remuneration for the board of directors and the executive management and the other terms of employment/service is considered competitive and consistent with the company's long-term shareholder interests.
The Board of Directors has adopted a remuneration policy for the Board of Directors, the Executive Board, material risk takers and a number of other employees. The remuneration policy has been approved by the general meeting. It appears from the remuneration policy that remuneration for Topdanmark’s management should be competitive with the remuneration at comparable companies.
Topdanmark's remuneration structure, which is described in both the Annual Report and on the Company's website, is intended to optimise the long-term value creation at Group level as well as ensure consistency between the interests of management, the company and shareholders. The remuneration to the Executive Board and a number of executives is based on a fixed basic salary. A fixed share, 10% for the Executive Board, Group Executive Management and a number of grade A and B+ managers, and up to 10% for selected other managers, is paid as share options in accordance with Topdanmark’s revolving share option programme (the “LTI Programme). In addition to this, a cash and share-based incentive programme (the “STI Programme”) which is tied up with the completion of a number of predefined goals is included as a possible remuneration element in the salary package to the Executive Board and a number of senior managers.
As the expected value creation at Group level is reflected in the share price, the fact that part of the fixed salary is paid out as share options and/or shares in accordance with the STI programme encourages the executives to be more holistic in their approach to value creation and thus increases the merging of interests between management and Topdanmark’s shareholders..
4.1.2. The Committee recommends that share-based incentive schemes are revolving, i.e. that they are periodically granted, and that they primarily consist of long-term schemes with a vesting or maturity period of at least three years.
As described in Topdanmark's remuneration policy published on the company's website, it is a revolving share option programme for the Executive Board and a number of grade A and B+ managers. The options may not be exercised any earlier than subsequent to the publication of the first interim results announced three years after the options were acquired. The strike price is equivalent to the market price on the last trading date in the financial year immediately preceding the granting of options, plus 10%.
4.1.3. The Committee recommends that the variable part of the remuneration has a cap at the time of grant, and that there is transparency in respect of the potential value at the time of exercise under pessimistic, expected and optimistic scenarios.
Topdanmark’s remuneration policy – and agreements take into account the current rules on remuneration, including the lex specialis which i.a. defines the limits to the variable parts of the total remuneration, and set requirements for clarity and measurability of performance criteria, and the potential value when exercising the options.
4.1.4. The Committee recommends that the overall value of the remuneration for the notice period, including severance payment, in connection with a member of the executive management’s departure, does not exceed two years’ remuneration including all remuneration elements.
In executive management contracts entered after November 2017, the total value of the remuneration relating to the notice period, including severance pay, do not exceed two years of remuneration, including all components of the remuneration.
In executive management contracts entered before November 2017, the maximum termination payments, in accordance with the previous corporate governance recommendations, will represent the last two years' remuneration.
4.1.5. The Committee recommends that members of the board of directors are not remunerated with share options and warrants.
The remuneration of Topdanmark’s Board of Directors does not include share options or warrants.
4.1.6. The Committee recommends that the company has the option to reclaim, in whole or in part, variable remuneration from the board of directors and the executive management if the remuneration granted, earned or paid was based on information, which subsequently proves to be incorrect, or if the recipient acted in bad faith in respect of other matters, which implied payment of a too large variable remuneration.
The remuneration of the Board of Directors does not include variable remuneration.
Topdanmark’s remuneration policy – and agreements take into account the current rules on remuneration, including the lex specialis for insurance companies according to which variable remuneration can be reclaimed if the variable remuneration has been paid/allocated based on information on results which can be proven to be incorrect and in which the executive has acted in bad faith.
5.1 Identification of risks and openness in respect of additional information
5.1.1. The Committee recommends that the board of directors based on the company's strategy and business model considers, for instance, the most significant strategic, business, accounting and liquidity risks. The company should in the management commentary give an account of these risks and the company’s risk management.
The Board of Directors regularly discusses, and particularly in relation to the relevant rules for insurance companies on Solvency II, Topdanmark's risk profile, including the most important risks associated with the realisation of the company's strategy and over-all goals, as well as the risks associated with financial reporting. The risk assessment made by the Board of Directors is included in Topdanmark’s annual risk assessment reported to the Danish FSA.
Topdanmark believes that the company’s future growth should be created by accepting primarily business risks and to a lesser extent financial risks.
Based on reporting and a discussion paper made by the Executive Board, the Board of Directors regularly discusses Topdanmark's risk management, ensuring that efficient risk management systems have been established. Additionally, the risk profile and risk management of the company are thoroughly reviewed at the Audit Committee meetings.
At Topdanmark, risk management is coordinated by the cross-organisational risk management function. The risk management function and the decentralised risk management units refer to the Risk Committee. The Risk Committee reports to the Board of Directors at each Board meeting. Once a year, Topdanmark prepares a risk report, which is included in the Annual Report.
Furthermore, Topdanmark has established a compliance function and a data protection officer (DPO) function in order to ensure, among other things, knowledge and observance of all relevant acts, rules etc. The compliance function and the DPO function report to the Board of Directors via the Audit Committee.
The establishment of a risk management policy etc. is included in the rules of procedure and the work plan of the Board of Directors.
Topdanmark's internal auditors control and report to the Board of Directors whether the risk policy adopted on the acceptance of, for example, business risks, including reinsurance cover, meets the frameworks set out by the Board of Directors. Furthermore, they check that the investment restrictions set out by the Board of Directors are observed.
5.1.2. The Committee recommends that the board of directors establishes a whistleblower scheme, giving the employees and other stakeholders the opportunity to report serious violations or suspicion thereof in an expedient and confidential manner, and that a procedure is in place for handling such whistleblower cases.
Topdanmark has had a whistle-blower scheme since 2012. The whistleblower scheme can be used by both Topdanmark’s employees and other stakeholders. The procedure for handling whistleblower cases has been laid down in business procedures.