Governance for the Year Ended 31 December 2016
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Governance For the year ended 31 December 2016. 89 Chairman’s Report 90 Directors’ Financial and Operating Report 92 Shareholder and Board governance 92 Corporate Governance Framework 94 Shareholders and shareholders’ meeting 95 Board of Directors and Board committees 103 Board committees 103 Audit Committee 109 Compliance and Business Conduct Committee 111 Compensation Committee: Remuneration Report 119 Millicom CEO and Executive Team 123 Management governance 127 Management responsibility statement Overview Strategy Performance Governance Financials Chairman’s Report The Governance section of Millicom’s 2016 Annual Report sets out Millicom’s commitment to good corporate governance and describes what has been achieved during the year. I was appointed as Chairman in May 2016, together with three other new Board members, and I strongly believe that we have the right mix of skills and experience in place. In addition, Millicom’s executive Board changes Strength through diversity management team, led by Mauricio During 2016, we welcomed four new Building strong governance functions and Ramos, is now complete following the Board members, all of whom joined us in acting with integrity remain at the forefront appointment of new members to the May 2016. Ms. Janet Davidson brings to of our commitment to good corporate Executive Management team. the Board significant experience in the governance, a commitment that will continue telecommunications and IT sectors in a in the decisions we make. Millicom’s Board of Directors “the Board” variety of strategy, operations and and its committees have dealt with a number Millicom’s strength is partly attributable to compliance areas. Ms. Davidson is a member of significant matters during the year, the diversity of people in our operating of the Compliance and Business Conduct including the setting up of the Compliance countries, regional offices and headquarters. Committee. and Business Conduct Committee and a We value different perspectives and strengthening of our compliance program. Mr. Simon Duffy also brings us extensive encourage sharing of viewpoints, benefiting Governance and compliance remain at the knowledge in telecommunications and media from the wide range of experience and forefront of decision making and strategic businesses and in emerging markets, and his backgrounds across the Group. These are direction. During the year, the activities of experience from many board roles. Mr. Duffy important elements that we will continue to the former Government Relations and is a member of the Audit Committee. foster as part of Millicom’s corporate culture. Corporate Responsibility Committee were Mr. José Miguel García Ferrández joins us Compliance assumed by the full Board. This area now having previously been the CEO of Jazztel in During 2016, we continued a thorough benefits from a more diverse experience Spain and formerly various positions within review of our compliance programs, that can be brought to bear on the broad Cable & Wireless. Mr. García brings to the supported by the Executive Management range of topics and geographical spread group his broad experience in leading and our Compliance and Business Ethics of these issues. transformational telecommunications team, to further strengthen the practices Role of the Board businesses in international markets. we already have in place. Executive The Board is responsible for deciding Mr. García is Deputy Chairman of the Board Management fully dedicated itself to this Millicom’s strategy, financial objectives and and serves as a member of the Audit process through several initiatives and operating plans. The Board also plans for Committee and the Compensation enhancements this year, as discussed herein. CEO succession and reviews and approves Committee. In its first full year of operation the plans for other senior management positions. Compliance and Business Conduct In addition, I joined the Board as Chairman. Committee led this transformational process. I am also the Chairman of Kinnevik AB, Millicom’s largest shareholder and have On behalf of the Board, I would like to various other non-executive director roles confirm our commitment to strong corporate across a range of industries. governance. We are committed to contributing to build a first class Millicom I would like to thank Ms. Cristina Stenbeck, culture of compliance and we reassert our Mr. Anders Borg, Dame Amelia Fawcett and belief that Millicom can be a force for good Mr. Paul Donovan, the departing members of through our dedication to ethics and the Board, for their service to the Board and compliance in all of our markets. We look its committees. forward to engaging with you and thank you for being part of our journey. Tom Boardman Chairman of the Board of Directors Millicom Annual Report 2016 89 Overview Strategy Performance Governance Financials Directors’ Financial and Operating Report1 Group performance Profit before taxes at US$71 million included In 2016, we made substantial progress the effects of the increase in interest towards our strategic goal of a two-fold expenses described above as well as the reconfiguration of our business, rapidly impairment of the value of our interest in growing mobile data and building cable LIH, an equity investment. while pushing ahead with major initiatives The Group net tax charge in 2016 was to enhance our operational efficiency. US$180 million leaving a net loss for the The scope changes that occurred on year from continuing operations at 31 December 2015 (see “scope changes” US$(109) million. The profit of US$19 million section on page 28) make the performance from discontinued operations reflected the and results of the Group not directly profit on the sale of our business in DRC. comparable between 2015 and 2016 – As a result, the net loss for the year was results for the year ended 31 December 2015 US$(90) million. The share of losses of included Guatemala and Honduras fully non-controlling interests was US$58 million. consolidated while those for 2016 do not. The net loss for the year attributable to In 2016, total revenue for the Group was Millicom owners was US$(32) million. US$4,374 million. In Colombia, our largest Earnings per share was (0.32) cents. market, we saw competitive pressures Share Capital throughout 2016, although easing At 31 December 2016, Millicom had somewhat at the end of the year. 101.7 million issued and paid up common Gross profit was US$3,096 million, or a shares of par value US$1.50 each, of which margin of 70.8%. 1.4 million were held by the Company as treasury shares (2015: 1.6 million). During the Operating expenses represented only 40.7% year the Company acquired approximately of revenue. Operational efficiencies achieved 37,000 shares and issued around 208,000 during the first year of our Project HEAT shares to management and employees initiatives underpinned our margins and cash under the LTIP remuneration plans and flow, delivering a lower operating cost run approximately 8,000 shares to Directors as rate as well as Capex and working capital part of their annual remuneration. savings during 2016. Distribution to shareholders and Our operating profit amounted to proposed distributions US$482 million, an 11% margin. On 17 May 2016, at the Annual General Net financial expenses were US$372 million, Meeting of shareholders, a dividend including one-off costs in respect of our distribution of US$2.64 per share was tender offers in December 2016 for approved, and subsequently paid to US$300 million of outstanding bonds, and shareholders. for the early redemption of our Swedish This year’s proposed dividend is consistent Krona bond due in 2017. with distributions in 2015 and 2016. 1 Alternative performance measures presented in this report are non-GAAP measures that are presented to provide readers with additional financial information that is regularly reviewed by management and used to make decisions about operating matters. It should not be viewed in isolation or as an alternative to the equivalent GAAP measure. See “Additional information” on pages 197 to 200 for definitions and reconciliations to the closest respective equivalent IFRS measure. Millicom Annual Report 2016 90 Overview Strategy Performance Governance Financials Directors’ Financial and Operating Report – continued Risks and uncertainty factors Management and employees TV Cable Parana The Group operates in an industry and in Over recent years, the Group has developed On 6 January 2017, after obtaining the markets which are characterized by rapid many key functions and improved support necessary regulatory approvals, Tigo change and subject to macro-economic, to local operations, including in the areas Paraguay completed the acquisition of TV competitive and political uncertainty. This of procurement, network development, Cable Parana for a total consideration of change creates opportunities and at the marketing, IT, governance, compliance and approximately US$19 million. same time a degree of risk. Many of the finance. During 2016 the remaining Executive Tigo Senegal and HTA inherent underlying risks in these markets, Management team positions of Chief Human We have agreed to sell our business in including regulatory change (including tariff Resources Officer, Chief Strategy Officer and Senegal to Wari Group, subject to regulatory controls and taxation), currency fluctuations Chief Compliance Officer were filled. approvals. The transaction represents an and underlying macro-economic conditions, At 31 December 2016, the Group’s headcount enterprise value for Tigo Senegal of impact on customers’ disposable income reached approximately 18,000 up from almost US$129 million. We have also initiated a and demand for our products and services. 16,000 at 31 December 2015. process to sell our 22% stake in Helios The telecommunications, cable and content Towers Africa. industries continue to evolve at an Outlook for the Group unprecedented pace, with access to the Based on constant currency, at a constant internet and streaming services gathering perimeter with Guatemala and Honduras pace and spreading to all parts of the world.