CORPORATE GOVERNANCE REPORT CHAIRMAN OF THE BOARD ON CORPORATE GOVERNANCE
Focusing of operations The turbulent economic environment in recent years has shown that the Trelleborg Group’s long-term strategy is effective in both good times and bad. creation and we can see the effect of this in, for example, the positive sales and earnings trend of recent years. On this basis, the Board continued its issues to ensure the continued focus of operations on those markets and ! ! " One important step was the agreement that Trelleborg signed with Freudenberg concerning a joint company in antivibration solutions. The new company will become a global leader with strong competitiveness and good growth potential. Securing the best legal and operational platform was an “The Board has devoted time # $ ! when the new company is planned to be operational. The agreement with and energy to the long-term Freudenberg opens new strategic perspectives for Trelleborg. The Board has market and structural issues devoted time and energy to the long-term market and structural issues that will ensure continued growth based on market penetration, complementary that will ensure continued acquisitions and divestments in polymer solutions. growth based on market During the second half of the year, the global economic recovery was once again hit by growing uncertainty, mainly due to debt problems in the penetration, complementary eurozone. As a result, the Board’s work in Trelleborg became gradually more acquisitions and divestments focused on heightened vigilance and decision preparedness in anticipation in polymer solutions.” of the impact on demand that a weakening economic trend can bring. % $ an agreement for a new revolving credit facility, which will form a solid base & ' ! V ) forward. The Group’s capital structure remained healthy, with a level of net ! ! * + / " 0 Corporate governance and responsibility issues play a major role in the Board’s daily work. There must be a good balance between developing the Group’s business opportunities, and identifying and managing the risks posed by an increasingly complex and dynamic business environment. The number of internal audit programs was increased and the focus was on business-sup- porting initiatives for the operations in high-growth countries. This concentra- ! ! " Openness and transparency are key conditions for an effective and sound governance and control culture. The Board monitors the continued development of various processes for external communication and information related to external stakeholder groups to ensure that this is conducted in accordance with relevant laws, regulations and standards. In a similar fashion, the Group is working toward continuous improvements in the quality of content and channels for all types of internal communication, so that this can play # ! $ & "
Anders Narvinger Chairman of the Board
34 Annual Report 2011 Trelleborg AB GRI: 4.1, 4.5 CORPORATE GOVERNANCE REPORT CORPORATE GOVERNANCE
Trelleborg is a publicly traded Swedish limited liability company listed on NASDAQ OMX Stockholm. Trelleborg applies the Swedish Code of Corporate Governance 0 & " no deviations to report. The report has been examined by the company’s auditor.
Shareholders $ '?' U' =W ! Annual General Meeting attendance 2007-2011 in attendance, personally or by proxy, rep- % Number Share capital in Trelleborg amounts to < U'=W 100 1,000 SEK $' M, represented by total number of votes. A single share- < $ < $< = $ ! 80 800 holder, Dunker Funds and Foundations, value of SEK "'<" 60 600 ) <' Trelleborg has two classes of shares: U Further information on corporate governance The following information is available at www.trelleborg.com [ 0 & $ / ! " Information regarding Trelleborg’s Annual General Meetings since / ! \ ^ H&Z – Minutes of AGM – President’s presentations – Press release GRI: 4.1, 4.5 Annual Report 2011 Trelleborg AB 35 CORPORATE GOVERNANCE REPORT Nomination Committee Nomination Committee for Meeting re-elect all Board members: Hans Björck, Claes Lindqvist, Sören H the Annual General Meeting Mellstig, Peter Nilsson, Bo Risberg, General Meeting Name/Representing Share of Share of Nina Udnes Tronstad, Heléne Vibbleus votes, votes, Bergquist and Anders Narvinger as H & Z September December passed a resolution regarding the Nomi- 30, 2011 31, 2011 Chairman. nation Committee and assigned the _ `{ U0 W The Nomination Committee has Chairman of the Board the task of asking Henry and Gerda Dunker Foundation ?/"/| ?/"/| decided to propose the re-election of PricewaterhouseCoopers AB as major shareholders at the close of the Henrik Didner Didner & Gerge Funds ="'| ="/| " third quarter to each appoint one member Peter Rönnström to the Nomination Committee. The com- Lannebo Funds "/| "=| The Board of Directors position of the Nomination Committee Thomas Eriksson was published on Trelleborg’s website Swedbank Robur Funds " | " | I $ J % and through a press release on October Johan Held comprised eight members elected by the '$ " H + - AFA Insurance Companies "'| "?| Annual General Meeting, including the ter, the Nomination Committee repre- Total 63.9% 63.7% President and CEO. Employees elect ) '/ U''W three representatives and one deputy to of the shareholders’ votes. the Board of Directors. Proposals to the Annual The Group’s CFO, Bo Jacobsson, who The guidelines of the principal own- General Meeting 2012 was succeeded by Carolina Dybeck ers for the selection of candidates to be The Nomination Committee has formulat- L H '$ $ nominated to the Board specify that they ed the proposals below for submission Board meetings as does the General shall possess knowledge and experience H & Z Counsel, Ulf Gradén, who serves as the relevant to Trelleborg’s operations. The resolution: Board’s secretary. Other salaried employ- Nomination Committee observes the ees of the Group participate in the Board rules regarding the independence of The Nomination Committee resolved meetings to make presentations on Board members, as stated in the to propose that the Annual General ! " Swedish Code of Corporate Governance. ^ 0 = U=W telephone conferences. The members Work of the Board of Directors of the Nomination Committee and the J ! U W" ! # shareholders who appointed them are on structural issues and the strategic plan. presented in the table below. In addition, February No. 1: Legal disputes and insurance coverage, Year-end Report, the Chairman of the Board, Anders H _ $ 0 $ H $ Narvinger, was a member of the Nomi- Structural issues, Financing, Prior to the AGM. 0 " As a basis for the Committee’s work, No. 2: Financing. information on the company’s operations April No. 3: Y + $ @ and strategic focus was presented by issues, Financing, Prior to the AGM, Committee reports. the President. The Chairman of the No. 4: Statutory Board meeting. Board presented the annual evaluation of the Board members’ activities, and July No. 5: Interim report for second quarter, Audit Report, provided information on the Board’s work Committee reports. during the year. Each chairman of the September No. 6: Review of Trelleborg’s operations in Brazil, Structural Board’s committees provided further issues. information on work in the various committees. The Nomination Committee October No. 7: @ /" has also met with a number of individual No. 8: Interim report for third quarter, Committee reports, Board members for interviews and Structural issues. discussions. December No. 9: $ @ /$ @ issues, Committee reports, Audit report. The President presents a report on the operations’ performance at ordinary Board meetings. All business areas are usually given an opportunity to make an in-depth presentation of their operations at a Board meeting at least once per year. The Board conducts reviews with the auditor when audit reports are to be considered. 36 Annual Report 2011 Trelleborg AB GRI: 4.5, 4.6, 4.7, (4.10) CORPORATE GOVERNANCE REPORT Independence of the Board Establishment and follow-up of annual Auditor The Board’s assessment, which is work plans for the Internal Control Trelleborg’s auditor is the Pricewater- staff function. shared by the Nomination Committee, 0 HJ of the Board members’ independence Review of continuous reporting from the public accountants, including authorized in relation to the company and the Internal Control staff function relating to public accountants Mikael Eriksson and shareholders is presented in the table internal audits and the proactive work Eric Salander. Mikael Eriksson is the Audi- = = " H on the internal control environment. tor in Charge. PricewaterhouseCoopers AB table, Trelleborg complies with the ! H & Swedish Code of Corporate Governance’s Follow-up of activities relating to the Meeting for a period of four years. requirements that the majority of the Group’s corporate responsibility issues Board members elected by the General and risk management. Meeting must be independent in relation to the company and the company man- Review of reports from the company’s agement, and that at least two of these AGM-elected auditor, including the shall also be independent in relation to auditor’s audit plan. the company’s major shareholders. Review of the plan for production of Evaluation of Board members 2011 the Annual Report. MIKAEL ERIKSSON The Chairman of the Board is responsible Authorized Public Accountant, Auditor in Finance Committee for evaluating the Board’s work, including Charge the work of individual members. This Y $ 0 - H & " occurs annually in accordance with an prised Heléne Vibbleus Bergquist, who [ [ ! 0 HJ " established process. Periodically, evalua- also chairs the Committee, Claes \ & $ tion is conducted with the assistance of Lindqvist, Sören Mellstig and Anders H [ H /" Narvinger. The Group’s CFO, Bo Jacobsson, Assignments: Beijer Electronics, G&L Beijer, Midway, external consultants. Readsoft, Sveaskog, EcoLean, Svenskt Näringsliv. Y $ ! - who was succeeded by Carolina Dybeck J \ ??" ed, in part, as a self-assessment whereby L H '$ $ & the Chairman of the Board interviewed General Counsel and Secretary of the all Board members individually and, in Finance Committee, Ulf Gradén, partici- part, through interviews and discussions pate in the meetings of the Finance involving the Nomination Committee and Committee. Head of Group Treasury also a number of individual Board members, ! " Y $ as well as feedback and discussions 0 U W with the entire Board of Directors. meetings. Its work mainly focused on: ERIC SALANDER The evaluation focused on such H ! Authorized Public Accountant Group Treasury. H & " expertise and work methods. The evalu- [ [ ! 0 HJ ?" ation is also used by the Nomination Financing issues. \ & $ Committee as the basis for proposals for H [ H " Board members and remuneration levels. Financial operations and policies. Assignments: Sony Ericsson, Hilding Anders, Gambro and Bong. Audit Committee Financial risk management. J \ '<" Y $ H 0 Heléne Vibbleus Bergquist, who also Remuneration Committee chairs the Committee, Claes Lindqvist, Y $ _ 0 Sören Mellstig and Anders Narvinger. comprised Anders Narvinger, who also Auditor’s remuneration 2011 The Group’s CFO, Bo Jacobsson, who chairs the Committee, Claes Lindqvist M was succeeded by Carolina Dybeck Happe and Hans Biörck. SEK 2011 H '$ $ & & Senior Vice President, Human PricewaterhouseCoopers Audit assignment =/ =/ Counsel and Secretary of the Audit Com- Resources, Sören Andersson, also Sec- mittee, Ulf Gradén, and the Head of the Audit activities other than retary of the Remuneration Committee, audit assignment 44 Internal Control staff function participate participates in Committee meetings. Tax consultancy services '= in the Audit Committee meetings, as does Y $ _ 0 Other services ? < the company’s auditor, when necessary. U )W " Y ! # Other auditors Y $ H 0 focused on: Audit assignment U W " Y ! # \ Audit activities other than Terms of employment and incentive audit assignment –– Accounting issues. issues for senior executives. Tax consultancy services – Other services Review of interim reports, year-end The Group’s management resource Total 50 59 reports and annual reports. planning. Of which discontinued operations – GRI: 4.3, 4.5 Annual Report 2011 Trelleborg AB 37 CORPORATE GOVERNANCE REPORT THE BOARD OF DIRECTORS Name Anders Narvinger Hans Biörck Claes Lindqvist Sören Mellstig Peter Nilsson Bo Risberg Position Advisor for President of Henry President and CEO. President and CEO of Skanska AB. Dunkers Förvaltnings AB. Hilti Corporation, Liechtenstein. M.Sc. Eng., Faculty of Graduate in business Graduate in business Graduate in business M.Sc. Eng. MBA and B.Sc. Eng. Engineering, Lund Univer- administration. administration and administration. sity, and B.Sc. Business M.Sc. Eng. and Economics, Uppsala University. Year elected " 0 / ' J " Born / " ? ? ? '' ?' Nationality Swedish Swedish Swedish Swedish Swedish Swedish Other assignments Chairman of Alfa Laval AB Board member of the Executive Director of Chairman of Apotek Board member of Beijer Board member of U W$ 0 @ Dunker Funds and Henry and Gerda Dunkers’ Hjärtat, Textilia, Ferrosan H HJ U W$ & L H*@" Management AB and Foundations, the Foundation and Founda- Z% H*@" ^ L@ HJ Industrier AB and The Board member of IMD @ U W Swedish Financial ^ " " J and the Swedish Defence Chamber of Commerce Supervisory Board. Capio. Board member of Reporting Board and of Dunker Foundations, _ H UYW" and Industry of Southern JM AB, Pernod Ricard SA SF Bio AB. Svenska Handelsbanken Board member of Dako Sweden. and ÅF AB. South Region, Novotek H*@" HJ U W$ " Dependence No. Yes. Dependent in relation Yes. Dependent in rela- No. Yes. Dependent in relation No. to the company’s major tion to the company’s to the company as a shareholders through major shareholders result of his position as his assignment on behalf through his assignment Trelleborg’s President. of Trelleborg’s main owner, on behalf of Trelleborg’s Dunker Funds and main owner, Dunker Foundations. Funds and Foundations. Previous experience A number of senior man- CFO of Skanska AB, Autoliv A variety of senior President and CEO of Business Area President, Various management agement positions in the Inc. and Esselte AB. positions at ASEA and Gambro and CFO and Vice Trelleborg Engineered positions at AT Kearney ABB Group, including Åkerlund & Rausing as President of Incentive. Systems and other posts and with ABB in Sweden President and CEO of ABB well as President and within the Trelleborg and Canada. Sweden and President of CEO of Höganäs AB and Group, as well as manage- The Association of Swedish Öresundskraft AB. ment consultant at BSI. Engineering Industries. Own and related- = $/ / " – = $/ / " ?$ " $?< $ " party holdings 2011 $ " Own and related- 30,404 shares. – 30,404 shares. 60,809 shares. 80,572 shares and 5,000 shares party holdings 2010 100,000 call options. Audit Committee Member – Member Member –– attendance ? ? ? ? / ? W Finance Committee Member – Member Member –– attendance ? ? ? ? = ? W Remuneration Com- Chairman Member Member ––– mittee attendance ? ? ? ? ? ? Board meeting Chairman Member Member Member Member Member attendance W Remuneration 2011* Board, SEK 000s $ ? / / / – / Committee, SEK 000s ? ? ? – – Total 2011, SEK 000s 1,200 450 550 500 – 400 Remuneration 2010* Board, SEK 000s 950 360 360 360 – 360 Committee, SEK 000s 150 50 150 100 – – Total 2010, SEK 000s 1,100 410 510 460 – 360 1) Not present at meeting 1, 2011. 2) Not present at meeting 1 and meeting 3, 2011. * Remuneration paid to the Board of Directors for the period May 2011 – April 2012.The fees paid to the members of the Board of Directors elected by the Annual General Meeting are approved by the Annual General Meeting based on the proposals of the Nomination For additional information Committee. For 2011, remuneration was paid as per the table above. Remuneration is not paid to members of the Finance Committee. No consulting fees were paid to Board members. Remuneration is not paid to Board members who are also employed by the Group. Remuneration excludes travel allowances. concerning remuneration, ^ =$ 38 Annual Report 2011 Trelleborg AB GRI: 4.5 CORPORATE GOVERNANCE REPORT – THE BOARD OF DIRECTORS Name Nina Udnes Tronstad Heléne Vibbleus Bergquist Peter Larsson Karin Linsjö Mikael Nilsson Birgitta Håkansson Position Group Executive of Management Consultant. Appointed by the Appointed by the Unions Industrial worker, Salaried employee, Kvæner and President Unions of the Trelleborg of the Trelleborg Group appointed by the Unions appointed by the Unions of Kvæner Verdal AS. & U[ `W" UW" of the Trelleborg Group of the Trelleborg Group UW" U[ `W" M.Sc. Eng. Graduate in business Engineer. Elementary school and Training in labor law, Secretarial studies, administration. plant training. economics and personnel training in IT and policy. accounting. Year elected / Born ? ? '? ?/ '< ? Nationality Norwegian Swedish Swedish Swedish Swedish Swedish Other assignments Chairman of the Board, Board member of Nordic Chairman of Unionen Chairman of Trelleborg Vice Chairman of Unionen Kværner Piping Technology Growth Market NGM AB, Trelleborg AB. Swedish Works Council Trelleborg AB. AS and Kværner Jacket Renewable Energy Corpo- UW 0 Technology AS. Board ration ASA, TradeDoubler Trelleborg European Works member of Kværner HJ U W$ a HJ Council. Board member of Stord AS. SIDA. H ? L HJ" Dependence No. No. – – – – Previous experience Various management posi- Senior Vice President, tions at Statoil in Norway, Group Controller, AB Sweden and Denmark. Electrolux, Authorized Public Accountant, partner and member of the Board of Pricewaterhouse- Coopers in Sweden. Own and related- – /$?? " $ " ? " – '$ " party holdings 2011 Own and related- – 4,550 shares. 1,800 shares. 501 shares. – 1,602 shares. party holdings 2010 Audit Committee – Chairman –––– attendance ? ? Finance Committee – Chairman –––– attendance ? ? Remuneration Com- –––––– mittee attendance Board meeting Member Member Employee representative Employee representative Employee representative Deputy employee repre- attendance =W U[ `W" ' /W UW" UW" U[ `W" Remuneration 2011* Board, SEK 000s / / – – – – Committee, SEK 000s – ? –––– Total 2011, SEK 000s 400 550 – – – – Remuneration 2010* Board, SEK 000s 360 360 – – – – Committee, SEK 000s –150–––– Total 2010, SEK 000s 360 510 – – – – 3) Participated by telephone at meeting 8, 2011. 4) Appointed as member by employees at the 2011 AGM. * Remuneration paid to the Board of Directors for the period May 2011 – April 2012.The fees paid to the members of the Board of Directors elected by the Annual General Meeting are approved by the Annual General Meeting based on the proposals of the Nomination For additional information Committee. For 2011, remuneration was paid as per the table above. Remuneration is not paid to members of the Finance Committee. No consulting fees were paid to Board members. Remuneration is not paid to Board members who are also employed by the Group. concerning remuneration, Remuneration excludes travel allowances. ^ =$ GRI: 4.5 Annual Report 2011 Trelleborg AB 39 CORPORATE GOVERNANCE REPORT GROUP MANAGEMENT Name Peter Nilsson Carolina Dybeck Happe Lennart Johansson Jim Law Claus Barsøe Position President and CEO 0 U0W Business Area President, Business Area President, Business Area President, Other assignments: Board Trelleborg Engineered Trelleborg Automotive. Trelleborg Sealing Solutions. member of Trelleborg AB Systems. U W$ J { H HJ U W$ Trioplast Industrier AB and The Chamber of Commerce and Industry of Southern Sweden. M.Sc. Eng. M.Sc. in business admini- M.Sc. Eng. Bachelor of Science Electrical Graduate in business stration. Engineering, BS General Engi- administration. neering, Minor in Business. Born '' < ' ?? / Nationality Swedish Swedish Swedish American Danish Previous experience Business Area President, Various positions within Assa President of Kemira Kemi, Business Unit President, Market Director of Alfa Laval, includes Trelleborg Engineered Abloy and EF. business unit manager of Global Anti Vibration Solutions various positions at Systems and other posts at Kemira OY and Perstorp AB. at Trelleborg Automotive. Busak+Shamban and Polymer the Trelleborg Group, VP Sales & Engineering, Yale, Sealing Solutions. as well as management South Haven. consultant at BSI. Own and related-party $?< $ U ! ?$ " – ?$ " holdings 2011 $ " W" Own and related-party 80,572 shares and – 25,000 call options*. – 25,000 call options*. holdings 2010 100,000 call options*. Employed ? ? < = In current position since ? ? = @ ' " ! H - I ? I J : " # J % L " $ " QQ " ' % # " of SEK 10.98 per call option. Each call option entitles the holder to purchase one share of Series B in Trelleborg AB during the period March 15, 2008 – March 15, 2012 at an exercise price at SEK 125.50. As a result of the implemented rights issue in 2009 and in accordance with terms and conditions of the options, the exercise price was recalculated to SEK 57.70 per share and each call option will entitle the holder to purchase 2.18 shares. The principal owner’s objective of the call option program is to promote the long-term commitment of management executives in the company. Trelleborg AB did not participate in the offer and will not have any expenses in connection with the offer. @@ = I % "? H " V / " % =J L W = I % "? H ! % "" % X V # =J @@@ I # ; Y / % ' % # - $ # % [ $ % ! ' % # J % # ' % ! ! ' % # - > # \ I V " > ? J ? I + _ & Z Annual variable Long-term Total including SEK 000S Fixed salary salary program1) Total Pension pension President 2011 8,447 W 4,711 3,900 172 17,230 3,254 20,484 <$?? /$?? $ # ? " Group Management comprised nine individuals in addition to the President. Principles for remuneration The following are the principles for remunera- Trelleborg continuously gathers and evaluates Senior executives comprise the President and tion of senior executives adopted by the Annual information on market-based remuneration other members of Group Management. The General Meeting: levels for relevant industries and markets. principles are supplemented by a policy for Trelleborg will offer market-based terms of Principles for remuneration may vary depend- ) ! employment that enable the company to re- ing on local conditions. global Remuneration Policy covering all cruit, develop and retain senior executives. The remuneration structure will be based managers and senior salaried employees. The remuneration structure will comprise on such factors as position, expertise, Y $ & Z - ) $ experience and performance. agement amounted to SEK ' $= ?$ remuneration, which together form the U'?$ / $ W$ ) $ individual’s total remuneration package. and SEK /$ ' $ U< $ ' $ W$ pension premiums. 40 Annual Report 2011 Trelleborg AB GRI: 4.5 0_[_H &_^H^0 _[_ &_[ ZH^H&Z^ Name Maurizio Vischi Sören Andersson Patrik Romberg Ulf Gradén Claes Jörwall Position J H [ $ @ [ $ @ [ @ [ $ & @ [ $ ) @ " Human Resources. Corporate Communications Counsel and Secretary. & @ " MBA University studies in MBA and university studies Z !" _ & $ in behavioral science and 0 #$ 0 H " administration. and education. education. Born ?? ?' '' ?/ ?= Nationality Italian @! @! @! @! Previous experience in- Various HR posts at SCA. Various posts at Unilever and 0 0 % cludes [ " & " Z # & @! ^ ) J " 0 [Z*_ ) " Own and related-party – '$ $ 901 shares. $ " '$ = " holdings 2011 call options*. Own and related-party 25,000 call options*. 6,080 shares and 901 shares. 10,000 call options*. 16,031 shares. holdings 2010 10,000 call options*. Employed 1999 1998 ' 2001 1988 In current position since 2001 1998 2011 **** 2001 1988 * The principal owner Henry and Gerda Dunkers Donation Fund No. 2 issued a call option program in February 2008. At that time, nine senior executives purchased 255,000 call options in Trelleborg at a price of SEK 10.98 per call option. Each call option entitles the holder to purchase one share of Series B in Trelleborg AB during the period March 15, 2008 – March 15, 2012 at an exercise price at SEK 125.50. As a result of the implemented rights issue in 2009 and in accordance with terms and conditions of the options, the exercise price was recalculated to SEK 57.70 per share and each call option will entitle the holder to purchase 2.18 shares. The principal owner’s objective of the call option program is to promote the long-term commitment of management executives in the company. Trelleborg AB did not participate in the offer and will not have any expenses in connection with the offer. **** Patrick Romberg replaced Viktoria Bergman as Senior Vice President Corporate Communications on October 1, 2011. Annual variable salary Target figures Pension The annual variable salary is based on the achieve- - & $ ! " [ ) - " $ ) $ ! /? & ) comparability and the impact of any share buyback ) " [ $ & V !$ ) $ " / ) " $ $ J - [ [ '? ! $ Board of Directors. Annual variable salary does not SEK "?' [ $ constitute pensionable income and does not form $ SEK " ? ! $ + " Y $ [ SEK ?" $ ! ' $ ! ) ! ) '? ? ) " Y [ $ ) " ) $ " ! ) = ' ) Outcome and payment are rendered invalid as of that time. Some of the salary in 2011. ) The result is calculated annually and accumulated + ' " Long-term incentive program over the three-year period and potential payments Y $ ' @ ?$ J % + ) '?$ ) " ! [ ) $ ! + become effective. ) V $ $ & " - ! + =$ Severance pay $ " J $ ! [ $ ! ! - + /" { / $ $ $ { - constitute pensionable income and do not form " [ ! " " Y $ ) " % $ ) are cash-based and constitute a supplement to the SEK ! ! '$< $ " 0 ) ) $ ) U $?/ $ W ) ! SEK '$= '$ U/$=<=$ W" $ $ / $ ! & % = ! ) ! " Other incentive programs & ) " Purpose ! " term content. The aim is to continue to promote and ) [ ) $ & $ & " ) " ^ =$ " GRI: 4.5 Annual Report 2011 Trelleborg AB 41 CORPORATE GOVERNANCE REPORT OVERVIEW OF GOVERNANCE IN THE TRELLEBORG GROUP Shareholders SaeodesSShareholdersharareholdersrs RResRee olul tittioioionnss NominationNominanation The right of shareholders to make decisions on the fformorm the Annual General Meeting PProProposp salsalls CoCCommitteemmitteemmittee affairs of Trelleborg is exercised at the Annual Gen- ElectioEleEEllecctctititionsononnss EElElectic ions eral Meeting or, where appropriate, at an Extraordi- InformaInfInfnforormormrmaatttiionon nary General Meeting, which is Trelleborg’s highest Audit CommitteeCommittee,, decision-making body. The Annual General Meeting Board ofof Finance CommitteeCommittee,, is usually held in April. The Meeting adopts the Arti- AuditorsAuditors InformationInformation DirectorsDirectors Remuneration CCommitteeommittee cles of Association and, at the Meeting, the share- Objectives,j Strategies,g ReportsReports RiRisksk MMan-an- holders appoint Board members, the Chairman of SSteeringteering CoControlntrol agementagement the Board and auditor, and makes decisions regard- iinstrumentsnstruments InInernalernal ControlControl ing their fees. In addition, the Annual General Meet- Staff PresidentPresident and CEOCEO functionsfunctions ing passes resolutions regarding the adoption of OObjectectives,ives, Reports,, the income statement and the balance sheet, the aactivities,ctivities, forecasts,forecasts, vavalues,lues, TrelleborgTrelleborg TTrelleborgrelleborg TrelleborTrelleborgg TrelleborTrelleborgg from liability of the Board members and the Presi- EngineeredEngineered AAutomotiveutomotive SSealingealini g WWheelheel businessbusiness remree unerationuneration SystemsSystems SoSolutionslutions SySystemsstems ooverviewverview dent. The Annual General Meeting also makes reso- sstrt uctures lutions regarding the appointment of the Nomination External steerinsteeringg instruments IInternalnternal steeringsteering instruments Committee and its work, and the principles for the remuneration and employment terms for the Presi- dent and other senior executives. Responsibilities of the Chairman in part, by considering reports from the Audit Auditor The Chairman is responsible for the work of the Committee. The Board also assures the quality of Trelleborg’s auditor, elected by the Annual General J ! - $ Meeting, examines the company’s annual reports $ J " year-end reports and annual reports in detail at its and accounts, as well as the Board’s and the Presi- Chairman monitors operations in dialogue with the respective meetings. The Board has delegated to dent’s management. Historically, Trelleborg’s audi- President. He is responsible for ensuring that other Group management the responsibility for ensuring tor has been elected for periods extending for four Board members receive the information and docu- + - years. The auditor bases its work on an audit plan mentation necessary to maintain a high level of tation material in conjunction with meetings with and obtains the Audit Committee’s opinions on quality in discussions and decisions, and checking $ " # ! that the Board’s decisions are executed. The Board committees before the audit plan is established. The auditor Chairman is responsible for ensuring that new The Audit Committee’s objective, in accordance continuously reports observations to the Audit Board members undergo requisite introductory with the instructions for the Audit Committee Committee throughout the year and to the entire training and that the Board continuously updates established by the Board of Trelleborg, is to Board after the hard-close audit during the autumn and deepens its knowledge of the company. The represent the Board by monitoring the company’s and in connection with the adoption of the six- Chairman is also responsible for annually evaluating $ { ! month report and the annual report by the Board. the Board’s activities, and this evaluation is then task, oversee the effectiveness of the company’s The auditor’s assignment is presented in a written shared with the Nomination Committee. The internal control, internal audit and risk manage- auditor’s report at the Annual General Meeting. Chairman represents the company in all ownership ment. The Audit Committee’s objective is also issues. Nomination Committee to keep itself informed in matters relating to the Procedures for the Nomination Committee’s ap- Responsibilities and work of the Board audit of the Annual Report and the consolidated pointment and work are adopted by the Annual The Board is responsible for managing operations $ ! General Meeting. The Nomination Committee pre- in the interest of the company and all its share- auditor’s impartiality and independence, and to pares and submits proposals to the Meeting on the holders in accordance with external and internal provide assistance when preparing proposals election of Board members, the Chairman of the steering documents. The framework comprises a regarding the appointment of the auditor for ap- Board and, where appropriate, the auditor as well written formal work plan for the Board that is proval by the Annual General Meeting. The Audit as their fees. The Nomination Committee shall adopted by the Board each year. The Board moni- Committee shall also act on behalf of the Board " - tors the President’s work through ongoing reviews to support and monitor the Group’s work with cor- of the operation over the year. The Board’s respon- porate responsibility and the overall coordination of the third quarter, who are to be contacted by the sibilities include ensuring that there are effective of the Group’s risk management. The results of Chairman of the Board at that time. These share- systems for follow-up and control of the company’s the Audit Committee’s work in the form of obser- holders then have the right to appoint one member operations, that there is satisfactory internal vations, recommendations, motions and mea- each. The Nomination Committee may also decide control and that internal steering instruments have sures are reported to the Board on a regular that the Chairman of the Board be a part of the been established. In addition, the responsibilities basis, usually at the subsequent Board meeting. Committee, but not be appointed to serve as its of the Board include setting targets and strategies, chairman. The Finance Committee’s objective is to represent decisions concerning major acquisitions and J - divestments of operations or other major invest- $ $ Board of Directors - Composition of the Board to annually assess and propose changes to the ments and loans in accordance with the Treasury Treasury Policy, to evaluate and prepare matters In accordance with the articles of association, the [ " J " J for decision by the Board and, after each meeting, Board of Directors shall consist of three to ten annually evaluates the President and other senior to report on its work at the subsequent Board members, without deputies. Board members are executives and oversees the planning of managerial meeting. elected annually by the Annual General Meeting for succession. Trelleborg’s Board of Directors meets the period until the next Annual General Meeting. at least seven times per year. The Remuneration Committee’s objective is to In accordance with legislation, employees elect represent the Board in matters concerning three Board members and a deputy. Trelleborg’s remuneration and terms of employment for the CFO participates in the Board meetings as does reporting President and executives reporting directly to the the General Counsel, who also serves as the J + $ President based on the principles adopted by Board’s Secretary. The Board has established in part, through instructions to the President, the Annual General Meeting and the applicable three committees, the Audit Committee, the Finance policy. The Committee regularly presents reports Committee and the Remuneration Committee. Board and through the Communications Policy and, on its work to the Board. 42 Annual Report 2011 Trelleborg AB GRI: 4.1, 4.5, Governance (EC), EN, LA, HR, SO, PR CORPORATE GOVERNANCE REPORT President and Group assurance that the goals of the Trelleborg Group are can view complete versions of the Group’s numerous achieved in terms of appropriate and effective governance instruments on Trelleborg’s intranet. Management business activities, reliable reporting and compli- Rules of procedure of the Board of Directors The President and CEO manages Trelleborg’s day- ance with applicable legislation and regulations. to-day operations in accordance with external and The process is based on a control environment Each year, the Board of Directors establishes a writ- internal governance instruments. The framework throughout Trelleborg that creates discipline and ten work plan clarifying the Board’s responsibilities for this work comprises written instructions to the provides a structure for the other four components and regulating the internal division of duties between President established by the Board every year. The of the process, namely, risk assessment, control the Board and its committees, including the role of President is assisted by Group Management com- structures, information and communication, and the Chairman, the Board’s decision-making proce- prising managers for business areas and corporate " Y 0 dures, its meeting schedule, procedures governing functions. In consultation with the Chairman of the aims to provide reasonable assurance with regard to the convening, agenda and minutes of meetings, as Board, the President prepares necessary informa- ) well as the Board’s work on accounting and auditing tion and documentation on the basis of which the ) - $ ! " Board can make well-founded decisions. The Presi- ance with legislation, applicable accounting stand- procedure also govern how the Board is to receive dent presents matters and motivates proposed ards and other requirements on listed companies. information and documentation as the basis for its decisions. The President answers to and regularly Y work and to be able to make well-founded reports to the Board regarding the performance of primarily comprise the Trelleborg’s Treasury Policy, decisions. the company. 0 [ $ Z U Instructions for the President Trelleborg’s operations are organized into four W$ & " + Each year, the Board of Directors also establishes / " " written instructions for the President that clarify the has a decentralized structure, with a strong focus Internal control is described in more detail on President’s responsibility for operational manage- on responsibility and performance, which is com- // /'" ment, the form and content of reporting to the ! & ! Board, requirements of internal governance instru- that aim to achieve synergies. Risk Management ments and issues that always require a Board deci- sion or reporting to the Board, such as the adop- The President leads the work conducted by Risk Management is a staff function. Within the tion of interim reports, annual reports and year-end Group Management and renders decisions in con- scope of Trelleborg’s Enterprise Risk Management reports, decisions regarding major acquisitions and sultation with other members of the management U_Z W$ # & $ divestments of operations, decisions regarding other " H $ & Z business areas, business units and processes are large investments, decisions about investments comprised ten individuals. $ " _Z and loans in accordance with Trelleborg’s Treasury Group Management holds regular management is conducted centrally by the Risk Management staff Policy, information on guarantees above a certain " Y $ & Z function and is led by an ERM Board composed of level, adoption of remuneration and employment meetings. These focus on the Group’s strategic and representatives of the business areas and the Group terms for the President and executives reporting operational development and budget follow-up. In staff functions. The function reports to the Group’s directly to him. addition to these meetings, close cooperation takes General Counsel and provides the Audit Committee place on a daily basis on various issues between with regular reports. Risk Management is described the operational business and representatives of the Code of Conduct in more detail under Risks and risk management on The Trelleborg Group works to create added value various staff functions. The company aims to create ==" an open, clear and honest working culture, with for its stakeholders without compromising the short decision-making paths. Group’s high ambitions with regard to the environ- External steering ment and social responsibility. The Code of Con- PrPresidentesident aandnd CCEOEO instruments duct establishes how Trelleborg should conduct its business, including principles within the areas of The external steering instruments that constitute CCFOFO Other Group stastaffff functifunctionss Workplace and environment, Marketplace, Society the framework of corporate governance within and Community, and Corporate Governance. The Trelleborg include the Swedish Companies Act, the Code of Conduct applies to all employees, includ- Annual Accounts Act, the listing agreement with ing managers and Board members in the Trelleborg TTrelleborgrelleborg TTrelleborgrelleborg TrelleborgTrelleborg TTrelleborgrelleborg NASDAQ OMX Stockholm, the Swedish Code of Engig neered Systey ms AutomotiveAutomotive SealSealingg SolutionSolutions Wheel Syystems Group, in all markets, always and without excep- Corporate Governance and other relevant legislation. tion. Trelleborg also encourages suppliers, sales BusinessBusiness BusinessBusiBusinesss BusinessBBiusinesss BusiBBusinessusiness s representatives, consultants and other business uunitsnits uunitsnits unitsunits uunitsnits Internal steering partners to adopt the principles of both the Global ProductProduct ProductProduct ProductProduct PProductroduct instruments Compact and Trelleborg’s own Code of Conduct. areas areas areaareass areas The internally binding steering instruments, in addi- Values tion to the Articles of Association adopted by the Trelleborg’s values – customer focus, performance, Annual General Meeting, include: Internal Control innovation and responsibility – comprise a long-term Rules of procedure for the Board of Directors of The Group’s Internal Control staff function acts as commitment that, when combined with its busi- Trelleborg. the Group’s internal audit function and reports to ness concept, objectives and strategies, guides the Audit Committee and the Group’s CFO. Within Instructions for the Audit Committee established the employees in their daily activities. Y by the Board of Trelleborg. Customer focus – refers to the ambition to be Control, the function works on developing, improving Instructions for the President of Trelleborg. the preferred supplier of solutions in selected markets. All decisions are made with the cus- Y J in the Group, in part, by proactively focusing on tomer in focus, with the objective of creating of Trelleborg. the internal control environment and, in part, by added value for the customers and Trelleborg examining how internal control works. The proactive Trelleborg’s Code of Conduct. through close cooperation. work on the internal control environment focused Trelleborg’s Treasury Policy. Performance – entails outperforming competi- particularly on developing and improving processes Communication Policy. tors and involves achieving results and the and establishing minimum requirements for good manner in which this is conducted. In addition to these steering instruments, there are in internal governance instruments and developing a number of policies and manuals that contain bind- Innovation – culture and attitudes within Trelle- and providing training and tools in the Group for ing rules, as well as recommendations that provide borg shall promote Innovation. The ambition is " principles and guidelines for the Group’s operations to think differently, in a new and creative manner, examine the effectiveness of internal control include and employees. These include Trelleborg’s Values on a daily basis. Innovation is an important risk assessments as a basis for prioritization, devel- Z $ ! - driver of growth. opment and follow-up of self-assessments in the $ Responsibility – all employees also have a Group’s companies and business areas, which are the minimum requirements to ensure good internal Responsibility for Trelleborg in its entirety – supplemented with internal audits. The internal $ " control process is formulated to provide reasonable reporting and the Remuneration Policy. Employees GRI: 4.1, 4.5, Governance (EC), EN, LA, HR, SO, PR Annual Report 2011 Trelleborg AB 43 CORPORATE GOVERNANCE REPORT REPORT BY THE BOARD OF DIRECTORS ON INTERNAL CONTROL The responsibility of the Board of Directors for internal control is regu- lated by the Swedish Companies Act and the Swedish Code of Corpo- & " Y as a part of the overall internal control in Trelleborg, and is a central component of Trelleborg’s corporate governance. Internal Control over represent the Board by keeping itself in- companies shall apply both A and B levels formed in matters relating to the audit of in respect of minimum requirements for the Annual Report and the consolidated good internal control and the approximately The following description represents the $ ! - ' H " Board of Directors’ report on internal toring the auditor’s impartiality and inde- The control structures in the account- " pendence and providing assistance when ing and reporting process, which are sig- has been examined by the company’s preparing proposals regarding the ap- auditor. pointment of auditor for approval by the $ ? Y 0 - Annual General Meeting. The Board has minimum requirements for good internal ing aims to provide reasonable assurance also established instructions for the control. with regard to the reliability of external President of Trelleborg and instructions Information and Communication J reports, annual reports and year-end Information and communication regarding Trelleborg. The responsibility for main- $ ) - taining an effective control environment cial reporting is prepared in accordance reporting are available to all employees and the day-to-day work on internal with legislation, applicable accounting concerned on Trelleborg’s intranet. Infor- control is delegated to the President. standards and other requirements on mation and communication relating to The Group’s Internal Control staff listed companies. function works as the Group’s internal through training. audit function and reports to the Audit Risk assessment In the Group, there is a process by Committee and the Group’s CFO. The ! # function focuses on developing, enhancing in writing awareness of and compliance reporting aims to identify and evaluate the and securing internal control in the with the Group’s governance instruments. # & The Group’s CFO and the Head of the concentrating on the internal control Internal Control staff function report the the Group’s companies, business areas environment and by examining the effec- results of their work on internal control and processes. The risk assessment tiveness of internal control. as a standing item on the agenda of the results in control targets that ensure that Internal governance instruments for Audit Committee’s meetings. The results the fundamental demands placed on of the Audit Committee’s work in the ) Trelleborg’s Treasury Policy, Communica- form of observations, recommendations comprise the basis for how risks are to be [ $ Z U and proposed decisions and measures managed through various control struc- W$ are continuously reported to the Board. tures. The risk assessment is updated on & ) an annual basis under the direction of the minimum requirements for good internal in accordance with relevant external and Internal Control staff function and the re- " sults are reported to the Audit Committee. internal governance instruments. Control structures Monitoring Control environment # Monitoring to ensure the effectiveness of The Board of Directors bears overall re- - through control structures in companies, conducted by the Board, the Audit Com- cial reporting. The Board has established business areas and processes. Man- mittee, the President, Group Management, a written work plan for the Board of Trelle- agement may entail that these risks are the Internal Control staff function, Group J - accepted, reduced or eliminated. The ties and regulates its and its committees’ Treasury and the Group’s companies internal distribution of work. The Board in the Group’s processes and good and business areas. Monitoring includes has appointed an Audit Committee from internal control and are based on the ! within its ranks to represent the Board in & ) in relation to budget and targets, quar- matters concerning the monitoring of the requirements for good internal control terly reports with results from self-assess- $ - $ - ments in the Group’s companies and $ cesses that are shown in the diagram business areas, and results from internal /'" + audits. Monitoring also encompasses control, internal audit and risk manage- following up observations reported by ment. The Audit Committee shall also ! ) / the company’s auditor. The Internal 44 Annual Report 2011 Trelleborg AB GRI: 4.1, 4.5, Governance (EC), EN, LA, HR, SO, PR CORPORATE GOVERNANCE REPORT Control staff function works in accord- business areas and processes, as well =< U= W ance with an annual plan that is ap- as work programs and budgets. U 'W $ ! proved by the Audit Committee. The U W ! Y " plan is based on the risk analysis and Activities in 2011 was on Europe, China, Brazil and the encompasses prioritized companies, Y $ Y 0 & US. Most of the internal audits were Internal Control at Trelleborg ThThee conttroll V J % $ H 0 $ Risk assssssessmentsessment environmentenviri onmentent the President, Group Management and other employees, Trelleborg’s goals and is formulated to provide reasonable assurance that Trelleborg’s goals are achieved in terms of the following: Processes CConContrrolol appropriate and effective business activities sstrust cturesccturturese MonitoriMonitoringMonitoringg reliable reporting IInfoInformationrmationrmation aandnd compliance with applicable legislation and regulations. communicationn The Internal Control process is based on a control environ- ment that creates discipline and provides structure for the Control structures relate to the controls that are chosen to other four components of the process – risk assessment, & # " @ control structures, information and communication, and == _ # monitoring. The starting point for the process is the regula- # $ /' ! tory framework for internal control issued by the Committee " of Sponsoring Organizations of the Treadway Commission U0 @ W$ !!!" " " Information and Communication. External information and communication include, for example, reporting to authori- Risk assessment is conducted within the framework of ) ! _ # Z U_ZW " stakeholders. Internal information and communication refer This is described in greater detail under Risk and risk to creating awareness among Group employees of external ==" and internal governance instruments, including authority and The control environment includes the values and ethics responsibilities. Important tools for this include Trelleborg’s upon which the Board, the Audit Committee, the President intranet and training programs. A process exists whereby and Group Management base their communication and & ! # ! actions, as well as the Group’s organizational structure, of Group policies. Trelleborg’s whistleblower policy entails leadership, decision channels, authorizations, responsibili- that each employee is entitled, without repercussions, to ties and the expertise of the employees. An overview of the report suspicions of legal or regulatory violations. Internal Group’s organization and governance, including external information and communication also pertain to the infor- and internal steering instruments, which are important mation generated by Trelleborg’s process for internal elements of Trelleborg’s control environment, is outlined on control being fed back to the Board, Audit Committee, / /=" ` - President and Group Management as a basis for making borg’s Code of Conduct and Trelleborg’s Values. The Code well-founded decisions. of Conduct comprises principles for how the business Monitoring should be conducted, while Values is a long-term commit- a range of activities, such as the monitoring of operations ment that is linked to the business concept, objectives and in relation to set goals, self-assessments, internal audit strategies and guides employees in their day-to-day activi- and other monitoring activities. ties. Trelleborg is characterized by a decentralized organiza- tion, based on management by objectives with clear targets and performance-based rewards. GRI: Governance (EC), EN, LA, HR, SO, PR Annual Report 2011 Trelleborg AB 45 CORPORATE GOVERNANCE REPORT conducted by the Internal Control staff aimed at raising levels of competence project accounting in relevant companies. function in cooperation with internal for relevant personnel and thus reducing Geographically, the Internal Control staff resources from other staff functions with risks due to incorrect management. In function will continue to focus on emerg- specialist competence in such areas as $ Y 0 & ing markets, but the majority of internal $ { ! function also participated in internal pro- audits will take place in Europe. controllers from various business areas. jects concerning new reporting procedures The Internal Control staff function’s Internal audits of IT security were carried for Enterprise Risk Management and out by the head of the IT Group staff Corporate Responsibility, where the controllers in the internal audits of function together with external consult- smaller companies. This will take place ants. role. This system is already in use in under the supervision of the Internal Y $ - Control staff function. chasing processes, inventory processes, work involving the internal control over sales processes and accounting and " Trelleborg, February 27, 2012 reporting processes. A special focus Board of Directors of Trelleborg ! Focus in 2012 value-added tax. Training courses were Y $ Y 0 - implemented in several countries in tion will work broadly with the audit of all Europe together with external consultants, processes, but with a greater focus on Etc. Purchasing Treasury Business area 2 Company 2 Business area 1 Company 1 Self-evaluation Internal audit Training/tools Group-wide reporting system with Internal audits are conducted by A number of training programs in Financial reports quarterly feedback from subsidiaries the Internal Control staff function in - and reporting processes Companies respond to how they cooperation with internal resources mum requirements for good inter- comply with the Group’s minimum from other staff functions and exter- # requirements for good internal nal consultants Training programs are aimed at Purchasing process control in selected processes Internal audits of IT security are increasing knowledge levels and % $ - carried out by the head of Group IT - res are planned and implemented together with external consultants cient processes and good internal Inventory process by the companies Comprises seven selected proces- control ) + - Training programs are a forum for subsidiaries, of which the largest rements for good internal control the exchange of experience and ) / Internal audits result in observa- sharing best practice Sales process apply both A and B levels in terms of tions, recommendations and propo- A new intranet section has been minimum levels for good internal sals for decisions and measures ) ' employees access to standardized smaller companies will only apply Y ! Process for property, plant tools and documents, as well as and equipment the A level up on a quarterly basis by business area controllers and the Internal examples of business solutions. Covers seven selected processes Control staff function. + - IT security process ments for good internal control All relevant employees annually ! # ! Salary management process, incl. of, and compliance with, the Group’s pensions and other compensation internal governance instruments. 46 Annual Report 2011 Trelleborg AB GRI: Governance (EC), EN, LA, HR, SO, PR