Netop Solution’s management emphasises the importance of practising good corporate governance and that overall management matters are planned in an expedient manner. The overall principles for governing Netop Solutions are aimed at ensuring that the company meets its obligations to its shareholders, employees, authorities and other stakeholders while serving to maximise long-term value. 

NASDAQ OMX Copenhagen has drawn up corporate governance recommendations and Netop Solutions generally complies with these recommendations.

Shareholders and other stakeholders
Netop Solution’s management aims for and endeavours to maintain constructive communications and dialogue with shareholders and other stakeholders. The company aims for a high degree of openness and to effectively communicate information.

The communications with and the information provided to shareholders and other stakeholders consists of quarterly financial statements and other announcements from the company and by way of meetings with investors, analysts and the press. Quarterly financial statements and other announcements are made available from Netop Solution’s website immediately after they are released, including to NASDAQ OMX Copenhagen. The company’s website also contains documents used for investor presentations.

Netop Solution’s Board of Directors regularly discusses the capital structure and share structure of the company and assesses whether it is consistent with the interests of the company and its shareholders. Netop Solutions has one class of shares and the company’s articles of association contain no restrictions as to ownership or voting rights.

If an offer were made to take over the company’s shares, the Board of Directors would, as prescribed by law, give full consideration to the offer and communicate the offer to the shareholders accompanied by the Board’s comments.

The general meeting is the company’s supreme decision-making authority and the Board of Directors finds it important that the shareholders receive detailed information on the matters to be considered at general meetings. All shareholders are entitled to attend and vote at general meetings, provided they have obtained an admission card as prescribed by the articles of association. At general meetings, shareholders are free to ask questions to the Board of Directors and the Management Board. Within a given deadline, they can also submit resolutions for consideration by the Annual General Meeting. 

The work of the Board of Directors
The Board of Directors is responsible for the day-to-day management of the company on behalf of the shareholders, defines the company’s goals and strategies and approves overall budgets and action plans. In addition, the Board of Directors supervises the company in a general sense and ensures that it is managed in an adequate manner and in accordance with Danish legislation and the company’s articles of association. The framework for the duties of the Board of Directors is laid down in the rules of procedure which are reviewed at least once a year and modified as and when required. The rules of procedure were most recently modified in 2009. The rules of procedure include procedures for the Management Board’s reports, the working methods of the Board of Directors and a description of the Chairman’s duties and responsibilities.  

The Board of Directors normally holds five to ten meetings per year or as required. Six board meetings were held during 2009. On three occasions, a Board member had to make apologies for absence. The Board has a regular agenda for its meetings.

The Board has not found reason to set up any board committees. In connection with the new requirements under the EU’s 8th directive concerning audit committees, which has been incorporated into section 31 of the Danish Act on State Authorised and Registered Public Accountants, the Board of Directors has resolved to let the full Board of Directors perform the usual functions of an audit committee.  The duties of the audit committee are set out in the rules of procedure most recently updated in 2009.

The Board is continually updated on the company’s situation, including through a monthly report on, among other things, the performance and management of core activities.

Composition of the Board of Directors
The Board has seven members during 2009. Of these Board members, three are elected by the employees of the company and the rest are elected by the shareholders. The Board members elected by the shareholders serve for terms of one year. The company has not fixed an age limit for Board members, as the Chairman evaluates the competencies of each individual member on an ongoing basis, and an annual review is performed of the work of the Board of Directors, including of each individual Board member. Board members elected by the employees of the company serve for a period as prescribed by the Danish Public Companies Act (currently four years).

Details on the individual Board members can be found on page 30 of the company’s Annual Report 2009.

Three of the Board members elected by the shareholders are considered to be independent: These are Ib Kunøe, who holds about 23% of the shares of Netop Solution A/S, Jan Elbæk, who is executive vice president of Atea A/S, and Peter Schüpbach, who is the former main shareholder of Genevalogic, the company whose shares Netop Solutions acquired in July 2008. The last of the four board members elected by the shareholders, Henning Hansen, is not considered to be independent, because he is an attorney and partner of the law firm of Philip & Partners, which is one of a number of legal advisers to Netop Solutions. However, the scope of business relations between Philip & Partners and Netop Solutions is not considered to be material.

The Board of Directors has been set up so as to ensure continuity, representation of competencies that are key to Netop Solutions and the ability to implement Netop Solutions’ strategy aiming to strengthen Netop Solutions’ market position. The Board members elected by the shareholders have broad experience in general business management, information technology, sales to professional customers and international relations.

In connection with the nomination of new candidates to be elected to the Board of Directors at the Annual General Meeting, the Board of Directors will send out prior to the general meeting a presentation of each candidate’s background and relevant skills as well as management positions and demanding directorships held by each candidate. The Board also motivates the nomination relative to the recruitment criteria it has defined.

Management Board
The Management Board is appointed by the Board of Directors and is responsible for the day-to-day management of Netop Solutions. The Management Board is also responsible for drafting proposals for overall goals, strategies and action plans and for preparing budgets and policies for the operational management of the company.

In addition to Netop Solutions’ Management Board, which currently consists of two persons, the company has a Chief Technology Officer (CTO) who is in charge of product development, support and other technical functions at Netop Solutions. The CTO is not registered as an executive of the company with the Danish Commerce and Companies Agency.  

Assessing the work of the Board of Directors and the Management Board
Netop Solutions aims to perform an annual self-evaluation process for the purpose of enhancing the work of the Board of Directors and the Management Board and to strengthen the platform for the company’s further development. The evaluation is both oral and written and includes an assessment of the quality of reporting from the Management Board to the Board of Directors, the cooperation between the Board of Directors and the Management Board and the competencies available to the Board of Directors. No evaluation process was performed in 2009.

Remuneration of the Board of Directors and the Management Board
Netop Solutions seeks to ensure that the remuneration of the Board of Directors and the Management Board is competitive and reasonable and sufficient to ensure that Netop Solutions is able to attract and retain competent employees.

Members of the Board of Directors receive a fixed annual remuneration and the total remuneration to the Board of Directors is approved by the shareholders in connection with the adoption of the annual report.

The remuneration paid to the board members in 2009 amounted to a total of DKK 400,000, of which the Chairman received DKK 100,000. Currently, members of the Board are not covered by any incentive schemes or bonus plans.

Remuneration of the Management Board, which currently consists of the CEO and the CFO, is determined by the Board of Directors. In 2009, remuneration of the Management Board consisted of a fixed salary including certain benefits such as an employer pension plan, a company car scheme and paid internet access. The terms of employment of the Management Board, including remuneration and severance terms are deemed to be consistent with ordinary standards for a position of a similar nature and do not entail any special liabilities on the part of the company.

The members of the Management Board were granted warrants as part of their remuneration in 2008. In 2008, CEO Kurt Bager was granted warrants at a nominal value of DKK 1,000,000, and CFO Claus Finderup Grove was granted warrants at a nominal value of DKK 500,000. When vested, each warrant entitles the holder to subscribe for one share of DKK 5. The warrants were granted on 26 June 2008 at an average exercise price equal to the average share price during the final 10 business days prior to grant, which is equal to an exercise price of DKK 72.95 for each new share with a nominal value of DKK 5.

The warrants vest over a period of two years at 1/24 for each month the executive is employed by Netop Solutions. After 10 June 2010, no further warrants will vest under the existing scheme.

On 10 February 2010, CEO Kurt Bager was granted additional warrants at a nominal value of DKK 490,675. When vested, each warrant entitles the holder to subscribe for one share of DKK 5. The warrants were granted effective 10 February 2010, they will vest effective from 1 March 2010 and will expire on 29 February 2012. The exercise price is DKK 10.19 per share with a nominal value of DKK 5, equal to the average opening share price during the last 10 business days prior to grant. Exercise of warrants granted is subject exclusively to the holder being employed with Netop Solutions at the date of exercise. No specific terms or targets have been defined in return for warrants granted.

The detailed terms and conditions of the warrants are set out in the Netop Solutions Warrant Terms. 

Risk management
The Board of Directors is responsible for ensuring that the company has effective risk management, including the identification of material risks relating to the business operations and the defined strategy. This duty also requires that a policy and a framework is defined for the company’s risk and that systems are developed for risk management. The policies and guidelines for the operating and financial risk management are adopted by the Board of Directors, and reporting of risks is a component of the Management Board’s regular reporting to the Board. See page 20 of the company’s Annual Report 2009 for a more detailed presentation of the risk factors Netop Solutions is exposed to.

Financial reporting process
The overall responsibility for the company’s control and risk management in relation to the financial reporting process, including compliance with applicable legislation and other financial reporting regulations, rests with the Board of Directors and Management Board.The Group’s control and risk management systems may provide reasonable, but not absolute, assurance that misappropriation of the Group’s assets, losses and/or significant errors and omissions in the financial reporting are avoided.

The Board of Directors assesses at regular intervals and at least once a year, the group’s organisational structure, its risk of fraud as well as its in-house rules and guidelines.

The Board of Directors and the Management Board establish and approve general policies, procedures and controls in key areas connected with the financial reporting process.The Board of Directors reviews the approved policies and instructions at least one a year.

On an ongoing basis, the Management Board monitors compliance with legislation and other financial reporting regulations and reports its findings to the Board of Directors.

Audit
Netop Solutions’ independent auditor is appointed by the shareholders in general meeting for terms of one year. Before nominating a candidate for appointment by the shareholders, the Board of Directors makes a critical assessment of the auditor’s independence, qualifications, etc.

The framework of the auditor’s duties, including the fixing of fees, audit-related and non-audit work, is set out in a written agreement. 

In his review of the annual report, the auditor reviews the material aspects of the accounting policies and discusses his observations with the Board of Directors.

The Board reviews the company’s in-house control systems at least once a year with a view to ensuring that the systems are appropriate and adequate and that they comply with generally accepted practise.