Corporate governance

Danware’s Board of Directors emphasises the importance of practising good corporate governance and that the overall management matters are planned in an expedient manner and to the effect that the company meets its obligations to its shareholders, employees, authorities and other stakeholders while serving to maximise long-term value.

Management monitors trends in corporate governance, including legislation, good practice and recommendations, seeking to enhance the company’s own standards in this field.

Being a Danish company listed on the Copenhagen Stock Exchange, Danware is subject to the rules laid down by the Copenhagen Stock Exchange. “Recommendations for good corporate governance” is part of the disclosure requirements for listed companies and imply that companies are required to comment on their position relative to the recommendationsaccording to the “comply or explain” principle. Danware generally complies with the recommendations for good corporate governance issued by the Copenhagen Stock Exchange except for the fixing of an age limit for board members elected at the general meeting.

Shareholders and other stakeholders
Danware’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 stakeholders consists of quarterly financial statements and other announcements from the company and through meetings with investors, analysts and the press. Quarterly financial statements and other announcements are made available from Danware’s website immediately after they are released. The website also provides material used for investor presentations. Danware makes continuous efforts to strengthen the electronic communications with its shareholders.

Danware’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. Danware has one class of shares and the company’s articles of association contain no restrictions as to ownership or voting rights. The Board of Directors assesses that the company’s share structure and capital structure are appropriate at present. Danware’s strategy includes making acquisitions that support the company’s product portfolio and strengthen its market position. Therefore, Danware has chosen to maintain sufficient cash resources to facilitate own financing of prospective acquisitions. If an offer is made to take over the company’s shares, the

Board of Directors will, as prescribed by law, give open 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 decisionmaking 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 Board of Directors’ work
The Board of Directors 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 2006.

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 in 2006. On two occasions, a Board member had to make apologies for absence. The Board has a regular agenda for its meetings and one of the meetings is a strategy seminar. The Board has not found reason to set up any board committees. The Board is continually updated on the company’s situation, including through two monthly reports on, among other things, the performance and management of core activities.

Composition of the Board of Directors
The Board of Directors has seven members. Four members are elected by the shareholders and three are elected by the employees of the company. The Board members elected by the shareholders serve for terms of one year. The company has not fixed an age limit for Board members. To date, the company has not found any reason to fix such limit as the Chairman evaluates the competencies of the individual Board members on an ongoing basis and an annual review is performed of the work of the Board of Directors and each individual Board members. Board members elected by the employees of the company serve for a period prescribed by the Danish Public Companies Act (currently four years). Details on the individual Board members can be found on page 39 of this annual report.

Half of the Board members elected by the shareholders are considered to be independent: Ib Kunøe, who holds 25% of the shares in Danware A/S, and Claus True Hougesen. The other two Board members elected by the shareholders are considered not to be independent: Peter Grøndahl is CEO of Danware, and Henning Hansen, attorney and partner of the law firm of Philip & Partners, is one of a number of legal advisers to Danware. However, the business relationship between Philip & Partners and Danware is not considered to be of material importance to any of the parties.

The Board of Directors has been composed so as to ensure continuity, representation of competencies that are key to Danware and the ability to implement Danware’s strategy aiming to generate renewed growth and strengthen Danware’s 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 Danware. 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 the Management Board, which has one member, Danware management team consists of executives in charge of sales and marketing, development and finance.

Assessing the work of the Board of Directors and the Management Board
Danware performs an annually-recurring 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. The most recent evaluation took place in the autumn of 2006, and as a result of the evaluation, more attention will be in the upcoming period be given to continuing the strategic efforts initiated.

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

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 2006 amounted to a total of DKK 800,000, of which the Chairman received DKK 200,000. 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 Chief Executive Officer, is determined by the Board of Directors. In 2006, remuneration to the Chief Executive Officer consisted of a base salary and certain benefits. 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 this nature and do not entail any special liabilities on the part of the company.

The Chief Executive Officer is not covered by an incentive scheme.

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 – 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 regular reporting to the Board. See page 21 for a more detailed presentation of the risk factors Danware is exposed to.

Audit
Danware’s 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 their review of the annual report, the auditors review the material aspects of the accounting policies and discuss their observations with the Board of Directors.

The Board reviews the 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.