Corporate Governance

The main purpose of the principles of corporate governance is to clarify and describe the rights and responsibilities of the owners, the Board of Directors, other governing bodies and the company management, in accordance with company policies and statutory rules, regulations and legislative framework. 

 Eltek’s principles for corporate governance are founded upon:

• Openness and transparency
• Equal treatment of shareholders
• Compliance with rules and regulations
• A balanced and structured Board
• Ethical and responsible decision-making
• Integrity in financial reporting
• Timely and balanced disclosure
• Holistic risk management, and
• Fair and responsible remuneration

1. IMPLEMENTATION AND REPORTING ON CORPORATE GOVERNANCE

Rules and regulations

The Board of Directors has the responsibility to ensure that the company adheres to sound corporate governance standards. The Board carries out an annual review of the company’s principles for corporate governance.

Eltek is a Norwegian public limited company (ASA), listed on the Oslo Stock Exchange and established under Norwegian laws. This document has been generated to comply with the Norwegian Accounting Act, Section §3-3b, which states that the company should issue an annual review of its Corporate Governance principles and practice, in a document included in or referred to in the Board of Directors Report.

The Norwegian Corporate Governance Board (NCGB) has issued the Norwegian Code of Practice for Corporate Governance (“the Code”). The Code can be found on www.ncgb.no.

Adherence to the Code is based on the “comply or explain” principle, which means that a company must comply with all the recommendations of the Code or explain why it has chosen an alternative approach to specific recommendations.

The Oslo Stock Exchange requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code in force at the time. An overview of continuing obligations for companies listed at the Oslo Stock Exchange is available at www.oslobors.no.

Eltek complies with the above mentioned rules and regulations, and the current edition of the Code, issued on 21 October 2010 and adjusted on 20 October 2011, unless otherwise is specifically stated. The following statement on corporate governance is structured the same way as the Code, thus following the 15 chapters included in the Code.

Values, ethical guidelines and social corporate responsibilities

The attitudes, behavior and performance of Eltek’s employees are guided by four core values, shared across all levels in the company.

• Customer Centric - We are driven by a strong ambition to deliver products and services that contribute profoundly to our customers’ own businesses.
• Technologically Ambitious - Our technological ambitions are a main motivator and a source of pride and self-confidence.
• Aggressively Competitive - Eltek has the culture of a challenger, always eager to outperform competitors.
• Culturally Sensitive - At Eltek, we do not underestimate the cultural challenges of operating globally. We always act with respect for local traditions, and cooperate closely across company, cultural and geographic borders to make this happen.

The behavior of Eltek representatives is regulated by the company’s Code of Conduct, which is applicable to all employees in all Eltek companies around the world. The Code of Conduct is designed to ensure ethical business practices, legal compliance, and conformity to locally accepted standards of good corporate citizenship in all the markets Eltek operates.

The company has also established and implemented policies with regards to strategy, delegation of authority, accounting and financial reporting, internal transactions, risk management, tax, treasury, procurement, human resources, anti-corruption, information technology, and communication. The Code of Conduct is applicable to the whole organization, its Board members, managers, employees, hired staff, consultants, intermediaries, and other acting on Eltek’s behalf.

Being a global player, Eltek has developed and implemented social responsibility principles built on a commitment to act responsibly and respectively, with an aim to contribute to social and economic development in the markets in which the company operates. Eltek takes the social, ethical and environmental impact of its products and services seriously, and seeks to operate in a manner that enhances the confidence that Eltek conducts its business in an ethical and responsible manner.

The Code of Conduct and more information on other Corporate Governance-related policies are available on www.eltek.com.

2. BUSINESS OVERVIEW

The objective of Eltek ASA’s business activities is stated in §2 in the company’s articles of association, as development, production and sale of equipment and services within the sectors of energy supply, data- and telecommunications and other activities, also through ownership and participation in other companies.

The articles of association are available on the company’s website on www.eltek.com

3. EQUITY AND DIVIDENDS

The Board of Directors would propose to distribute to the Shareholder any distributable equity exceeding a capital level appropriate to the company’s objectives, strategy and risk profile.

The Eltek Group reported equity of NOK 1,225 million and an equity ratio of 32.6 percent per 31 December 2011. The parent company Eltek ASA had distributable equity of NOK 740 million per 31 December 2011. The Board does not propose distribution of an ordinary dividend for 2011, although it has communicated that the proposed divestment of Nera Telecommunications Ltd may open for an extraordinary dividend upon completion of the transaction. Any such a proposal will be presented to the shareholders in due course for approval on an extraordinary general meeting.

The Board of Directors will generally seek to obtain authorizations to execute capital increases only for defined purposes. In the case that capital will be raised for several purposes, each purpose will be put forward for consideration by the General Meeting. Authorizations are valid until the following ordinary general meeting.

As per the end of 2011, the Board of Directors’ authorizations to execute capital increase or buy back own shares were limited to; purchase of up to 32,900,000 own shares with a nominal value of up to a total of NOK 32,900,000, in order to be able to buy back shares from the Company's shareholders, for cancellation in order to optimize the Company's capital structure, for payment in acquisition, or for settlement of any share or option based incentive programs to its employees.

As at 31 December 2011, Eltek ASA holds 89,905 own shares.

The company did not carry out any share capital transactions in 2011.

4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES

Eltek has one class of shares, and one share carries one vote.

In the case of capital increases, any deviations from existing shareholders’ pre-emptive rights have been and will be explained. If Eltek should purchase own shares, the trading will be executed over Oslo Stock Exchange or at prevailing stock exchange prices if carried out in any other way.

In the case of material transactions between the company and shareholders, members of the Board or key employees or associated parties, the Board of Directors will seek independent, third-party value estimates, unless the transaction is being presented to the General Meeting. The Board of Directors will also seek independent valuation in the case of transactions between subsidiaries with minority shareholders, except for ordinary business transactions on general market terms. Eltek’s guidelines are designed to secure that Directors and key employees report to the Board of Directors if they directly or indirectly have significant interests in transactions entered into by the company.

5. FREELY NEGOTIABLE SHARES

The articles of association include no limitations to trading in the company’s shares.

6. GENERAL MEETINGS

The articles of association do not limit, expand or deviate from the rules concerning the General Meeting in the Public Companies Act, Section 5.

As stated in the Articles of Association §3, the General Meeting is normally hosted at the company’s premises in Drammen although it may be held in Oslo. Notice of the General Meeting will be sent to all shareholders with known address at least 21 days in advance, together with the agenda and the proposal from the nomination committee. The notice will be formed in compliance with the recommendations.

In 2012 the Ordinary General Meeting will be held in Drammen on 15 May, 2012.

Documents related to General Meetings are made available on the company website (www.eltek.com), and are also sent to all shareholders with known address by mail. The website also incorporates information about the shareholders’ rights to present cases to the General Meeting, proposed resolutions, and proxy forms enabling the shareholder to vote in each individual case and each individual candidate. The documentation offered will be sufficiently detailed to enable shareholders to consider all items on the agenda. Shareholders may request that the documents regarding matters to be addressed at the general meeting be sent to such requesting shareholder.

Registration deadline is the day before the meeting, and shareholders prevented from attending may vote by proxy. The company informs about the procedures for proxy voting, and appoints a person responsible for voting on behalf of the shareholders.

The Board of Directors and the General Meeting chairperson ensure that the General Meeting gets the opportunity to vote for each candidate to the Board of Directors or other corporate bodies. The Chairperson of the General Meeting is elected in the meeting, and the Chairman or Vice Chairman of the Board, the nomination committee and the company’s auditor will be present on the Ordinary General Meeting.

7. NOMINATION COMMITTEE

Eltek has established a Nomination Committee consisting of three members, in accordance with the Articles of Association §7.

Two of the members of the Nomination Committee are members of the Board of Directors, which is a deviation from the recommendations in the Code of the NCGB. The Committee is composed in such a way that broad interests of the shareholders are represented.

The Nomination Committee functions for a period of one year. A new nomination committee will be elected on the Ordinary General Meeting in 2012, based on proposals from the existing committee.

The nomination committee proposes candidates to the Board of Directors to the General Meeting, which elects all shareholder-elected Board members and the Chairman of the Board. A charter for the Nomination Committee has been established by the General Meeting.

8. BOARD OF DIRECTORS

Eltek does not have a corporate assembly.

The Board and the Chairman of the Board is elected by the General Meeting, and may consist of up to 10 Board Members in accordance with the Articles of Association §5.

The Board of Directors currently consists of nine Directors, of which two are elected by and among the employees in Norway and seven by the shareholders. The shareholder-elected Board members are elected for one year by the General Meeting.

No member of the management is a member of the Board of Directors, and all Directors are independent of the company’s material business contacts. At least two of the shareholder-elected Directors will at any point in time be independent of the main shareholders of the company.

The Board of Directors works under impartiality regulations ensuring that any potential conflict of interest is identified and handled professionally.

Please see note 33 to the Consolidated Financial Statement for 2011 for an overview of the Board members shareholdings in Eltek as per 31 December 2011.

9. THE WORK OF THE BOARD OF DIRECTORS

The Board of Directors has the responsibility for the development, implementation and adherence to the company’s strategy, the supervision of the management of the company and its business activities and control functions to ensure responsible financial and risk management.

The Board of Directors has determined instructions to the Board in accordance with the requirements of the Companies Act, including rules and guidelines for the work and procedures of the Board. The Chairman of the Board is responsible for ensuring that the work of the Board is carried out in an effective and correct manner.

The Board of Directors follows a pre-defined meeting plan and agenda. The company’s strategy plan is subject to in-depth analysis, discussion, adaption, and approval once a year. The management regularly reports on the financial status and strategic progress, and in general prepares items of strategic importance for discussion and approval by the Board.

The Board of Directors has laid down instructions for the management of the company, with clearly defined distribution of responsibilities between the Board and the Chief Executive Officer. The CEO has been made aware of his special responsibilities to secure that the Board receives sufficient, precise, relevant and timely information so that the Board can fulfill its obligations.

The Board of Directors normally meets 8-12 times a year. There were 14 meetings in 2011, with the high number primarily explained by an ongoing divestment process. Two of the Directors are based in USA, and several of the Board meetings were telephone meetings.

The company has established an audit committee, consisting of three Board members of which the majority is independent of the company’s main shareholders. The Audit Committee assists the Board of Directors in administering and exercising its supervisory responsibility by preparing matters within selected areas. The Audit Committee shall meet when deemed necessary, normally at least in connection with quarterly and annual reporting.

The Board has appointed a Compensation Committee to help ensure thorough and independent preparation of matters relating to compensation paid to the company’s executive personnel. The Compensation consists of three Board members, of which all are independent of the company’s management.

The Board annually evaluates its own work, and a report is made available for the nomination committee.

10. RISK MANAGEMENT AND INTERNAL CONTROL

The Board of Directors acknowledges its responsibility to secure that the company has good internal controls and sufficiently advanced risk management systems, and at least annually assesses the most important risk factors and internal control functions.

The Audit Committee monitors that the Group has satisfactory and effective systems for assessing and controlling the Group’s risk exposure. The Committee also has the responsibility for ensuring that measures are implemented, if necessary, to reduce extraordinary risk exposure. For a detailed review of financial risk factors, please see the risk section in the Annual Report 2011.

The Audit Committee also ensures quality of the financial reporting, and has the responsibility for assessing the ongoing financial and accountancy reporting to the Group Management as well as external reporting. This takes place through reports and meetings with the management and the external auditor.

The financial reports are prepared by the CFO and Chief Group Accountant, in compliance with prevailing accounting standards and regulations. The financial reports are subject to quality assurance also by the Group Treasurer, Group Tax Director and Group Business Controller, with regards to consolidated figures as well as figures reported by subsidiaries.

Managers of the individual companies in the Group are responsible for risk management and internal controls within their areas, based on Group guidelines and policies and also subject to local legislation, rules, and regulations. The risk management is subject to supervision by the Corporate finance department.

11. REMUNERATION OF THE BOARD OF DIRECTORS AND THE NOMINATION COMMITTEE

The remuneration of the Board of Directors and the Nomination Committee is proposed by the Nomination Committee for approval on the General Meeting, in accordance with the Articles of Association §6 and §7. The Nomination Committee aims for the remuneration of the Board to reflect its responsibility, expertise, time commitment and the complexity of the company’s activities.

12. REMUNERATION OF EXECUTIVE PERSONNEL

The Board of Directors has established a Compensation Committee to assist in fulfilling its responsibilities to determine the compensation policy of the Group, to determine the compensation of Group Management, and to determine any bonus programs, other incentive schemes, and relevant pension programs.

Performance based remuneration is subject to an absolute limit, with the exception of share options issued prior to, and in, 2008.

The guidelines for remuneration of the executive personnel are communicated to the annual General Meeting.

13. INFORMATION AND COMMUNICATION

The Board of Directors has established guidelines for the reporting of financial results and other information, based on openness and equal treatment of all stakeholders.

Eltek aims to provide accurate and relevant information about the company in a timely, effective and non-discriminatory manner. The company adheres to the ‘Continuing Obligations’ for companies listed on Oslo Stock Exchange and have no deviations from Oslo Stock Exchange’s Code of Practice for online investor communication.

All stock exchange notifications are made available on both the Oslo Stock Exchange and the company’s website, as is the annual financial calendar. Any information sent to shareholders will at the same time be made available on the company website.

The company issues quarterly interim reports in compliance with all requirements, and host presentations open to the public in connection with the interim reports. The presentations are also broadcast live on the internet.

The company also participates on Norwegian and international industry and investment seminars, hosted by Eltek, investment banks or industry institutions.

14. TAKE-OVERS

The Board of Directors will apply the principle of equal treatment of all shareholders in the case of a takeover bid on the company. The Board of Directors has no intentions of impeding any such process without the consent of the General Meeting.

Care will also be taken to ensure that the company’s business activities are not unnecessarily disrupted.

In the event of a takeover bid or an indicated takeover bid, the company will review the offer and publicly issue its assessment and its recommendation to the shareholders, leaving shareholders sufficient information and time to form a view of the offer. If the Board’s assessment and recommendation are not based on unanimity, the specific members’ basis for excluding themselves will be explained. If required, the Board will obtain valuations from independent parties for publication simultaneously with the announcement of the Board’s recommendation.

Any transaction that in effect is a disposal of the company’s activities will be decided by the General Meeting.

15. AUDITOR

Eltek’s auditor is PricewaterhouseCoopers.

The company’s auditor annually presents the main features of the audit plan to the Audit Committee, and the auditor is present in the Board meetings concerning the annual financial statements. The auditor annually reviews the company’s internal controls, and the Audit Committee meets with the auditor without the presence of the management of the company. The auditors are providing a limited range of consulting services to the company, without this being in conflict with the auditors’ independence. The auditor’s independence is evaluated annually. The compensation to the auditors is presented to the Ordinary General Meeting.