Corporate Governance Report »see pages 198–199, SKF’s global campaign 2012 178 Contents 180 Introduction 180 Nomination Committee 181 General information about how the company is managed 182 The Board of Directors 186 President and Chief Executive Officer 186 The auditor of the company 186 Financial reporting 187 Internal control and risk management regarding financial reporting 187 Auditor’s report of the Corporate Governance Report 179 SKF Annual Report 2012 Corporate Governance Report Corporate Governance Report Introduction Code and the Swedish Annual Accounts Act. Fur thermore, SKF SKF applies the principles of sound corporate governance as has provided information on the company’s website in line with an instrument for increased competitiveness and to promote the Code requirements. The Annual General Meeting in 2012 capital market confidence in SKF. Among other things, this was also held in accordance with the Code rules. SKF has on means that the company maintains an efficient organizational 30 October 2012 announced the change of date of the Annual structure with clear areas of responsibility, that the financial General Meeting in 2013. This is a deviation from Rule 1.1 in the reporting is transparent and that the company in all respects Code, which states, inter alia: “As soon as the time and venue of maintains good corporate citizenship. the shareholders’ meeting have been decided, and no later than The corporate governance principles applied by SKF are in conjunction with the third quarter report, the information is based on Swedish law, in particular the Swedish Companies to be posted on the company’s web site”. The reason for the Act and the Swedish Annual Accounts Act, and the regulatory change was that a Board member due to late upcoming reasons system of NASDAQ OMX Stockholm AB (Stockholm Stock was prevented from participating on the original date of the Exchange). Annual General Meeting. Information under the Annual Accounts Act Chapter 6, § 6, The auditor of the company has reviewed this Corporate sections 3–6, are found at the following pages of the Admin- Governance Report. istration Report for the Group in the Annual Report 2012: Nomination Committee n Annual Accounts Act Chapter 6, § 6, section 3; see page 73 At the Annual General Meeting of AB SKF held in the spring n Annual Accounts Act Chapter 6, § 6, section 4; see page 74 2012, it was resolved that the company shall have a Nomination n Annual Accounts Act Chapter 6, § 6, section 5; see page 81 Committee formed by one representative of each of the four n Annual Accounts Act Chapter 6, § 6, section 6; see page 75 major shareholders with regard to the number of votes held as well as the Chairman of the Board. When constituting the Swedish Code of Corporate Governance Nomination Committee, the shareholdings per the last banking The Swedish Code of Corporate Governance (the “Code”) was day in August 2012 would determine which shareholders are originally introduced on 1 July 2005. The Code has been revised the largest with regard to the number of votes held. The names twice since the introduction and the applicable Code is available of the four shareholder representatives were to be published as at the website of the Swedish Corporate Governance Board, soon as they had been elected, however not later than six months www.corporategovernanceboard.se. before the Annual General Meeting 2013. The Nomination It is considered good stock exchange practice for Swedish Committee shall remain in office until a new Nomination Com- companies whose shares are traded on a regulated market mittee has been appointed. to apply the Code. SKF applies the Code, and this Corporate In a press release on 28 September 2012, it was announced Governance Report has been prepared in accordance with the that a Nomination Committee consisting of the following Governance structure Nomination Shareholders through External Committee shareholders’ meeting auditors Renumeration Board of Directors Audit Committee Committee President and CEO Internal Group Management audit Group Business areas staff units 180 SKF Annual Report 2012 Corporate Governance Report representatives of the shareholders, besides the Chairman of SKF Industrial Market, Regional Sales and Service and SKF the Board, had been appointed in preparation of the Annual Auto motive. Each business area works across the entire asset General Meeting 2013: life cycle for the different industries and develops and delivers products, solutions and services to OEMs and end-users. n Claes Dahlbäck, Foundation Asset Management Further, there are seven Group staff units: Group Finance and n Ramsay Brufer, Alecta Corporate Development, Group Technology Development, n Evert Carlsson, Swedbank Robur Funds Group Legal and Sustainability, Group People and Business n Caroline af Ugglas, Skandia Liv Excellence, Group Purchasing, Group Communications and The Nomination Committee is to furnish proposals in the Government Relations, and Group Business Transformation. following matters to be presented to, and resolved by, the See pages 188–189 in the Annual Report 2012. Annual General Meeting in 2013: Each business area has operational responsibility for its business. Policies and instructions are in place to ensure that n proposal for Chairman of the Annual General Meeting matters of certain importance are referred to the President n proposal for Board of Directors and/or the Board of Directors. n proposal for Chairman of the Board of Directors n proposal for fee to the Board of Directors The Board of Directors n proposal for Auditor Composition and remuneration of the Board n proposal for fee to the Auditor The Board shall, in addition to specially appointed members and n proposal for a Nomination Committee ahead of the Annual deputies, according to the Articles of Association of SKF, com- General Meeting of 2014 prise a minimum of five and a maximum of ten Board members, The proposals of the Nomination Committee are at the latest to with a maximum of five deputies. The Board members are be published in connection with the notice to the Annual General elected each year at the Annual General Meeting for the period Meeting 2013. up to the end of the next Annual General Meeting. Ten Board members, including the Chairman, were elected General information about how the company is managed at AB SKF’s Annual General Meeting held in the spring of 2012. The shareholders’ meeting is the company’s highest decision- In addition, the employees have appointed two Board members making body. The Annual General Meeting of shareholders shall and two deputy Board members. No Board member, except for be held within six months after the end of the financial year. the President, is included in the management of the company. At the Annual General Meeting the shareholders exercise their Information on the remuneration of the Board members voting rights for e.g. the composition of the Board of Directors, decided upon by the Annual General Meeting 2012 can be found adoption of principles of remuneration for Group Management in the Annual Report 2012, Consolidated Financial Statements, and election of external auditors. SKF has issued A and B shares. Note 25. It should be noted that the Annual General Meeting An A share entitles the shareholder to one vote and a B share decided, in accordance with the proposal of the Nomination to one-tenth of a vote. Committee, that a part of the remuneration to the Board mem- The Board of Directors has a responsibility for the company’s bers is to be received as a variable allotment corresponding to organization and for the oversight of the management of the the value of a certain number of SKF B shares after the publica- company’s affairs. The Chairman of the Board of Directors shall tion of the press release for the financial year 2012. The variable direct the work of the Board and monitor that the Board of allotments will be paid out in April 2013. This is a deviation from Directors fulfils its obligations. The Board annually adopts Rule 9.8 in the Code, which states, inter alia: “The vesting period written rules of procedure for its internal work and written or the period from the commencement of an agreement to the instructions. For more details on the rules of procedures and date for acquisition of shares is to be no less than three years”. the written instructions, see below under the heading “Activities By Instruction 1–2010 the Rule’s scope of application has been of the Board of Directors”. extended to include also synthetic options and other types of The President of the company, who is also the Chief Executive incentive programmes that do not involve the acquisition of Officer, is appointed by the Board of Directors and handles the shares. The Nomination Committee has informed the company day-to-day management of the company’s business in accord- that it is of the opinion that the proposal presented for decision ance with the guidelines and instructions from the Board. The by the Annual General Meeting is appropriate particularly con- approval of the Board is, for example, required in relation to sidering that the Nomination Committee has told the Board of investments and acquisitions above certain amounts, as well as Directors that it is an appropriate principle that each Board for the appointment of certain senior managers. The President member elected by the Annual General Meeting during a period is supported by Group Management. of three years should invest an amount equal to the annual Since January 2012 SKF primarily operates with three board allotment after tax in shares in SKF, and keep these shares business areas: SKF Industrial Market, Strategic Industries; as long as the relevant person is a Board member of SKF.