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Oslo Børs requires that listed companies issue a report on corporate governance. A review of annual reports for 2006 carried out by Oslo Børs shows that virtually all listed companies have published such a report, but there is still scope for further improvement in the content of these reports.
Good corporate governance by stock exchange listed companies plays an essential role in growing shareholder value, retaining the confidence of investors and maintaining a low cost of capital, and it is therefore important that companies report on their corporate governance policies and practices.
The report on corporate governance should be an essential tool for shareholders and potential shareholders to use when evaluating the company.
Oslo Børs is satisfied that many companies recognize the importance of providing a good quality of reporting in relation to the corporate governance guidelines, but also notes that there is scope for several companies to improve their reports.
Five companies with a primary listing on Oslo Børs failed to provide a report for 2006 on corporate governance as required by the stock exchange rules, and Oslo Børs has sent a letter criticising these companies for breach of continuing obligations. The companies in question are:- Fairstar Heavy Transport NV (formerly Fairmount Heavy Transport NV)
- Global Geo Services ASA
- Golar LNG Limited
- Golden Ocean Group Limited
- Hjellegjerde ASA
All five of these companies have stated that they will produce a report that will be included in their annual reports for 2007.
A further six listed companies only published a report on their websites, which does not fully satisfy the Oslo Børs requirements. These companies have also confirmed that they will include a report on corporate governance in their annual reports starting with the 2007 annual report.
Oslo Børs has also contacted 34 companies where the corporate governance report in the 2006 annual report falls short of the requirements in the Norwegian Code of Practice for Corporate Governance. This relates to reports that provided insufficient information on a number of areas of the Code and/or failed to address three or more of the main sections of the Code. This is an improvement from the financial year 2005, when Oslo Børs advised 41 companies of shortcomings in their reporting.
The Norwegian Code of Practice for Corporate Governance is based on the "comply or explain" principle. This means that a company must comply with each of the recommendations that make up the Code, or explain any deviation. The review carried out by Oslo Børs identified that the areas in which there is greatest potential for improvement relate to the auditor, the nomination committee and take-overs. Oslo Børs also notes that a number of the reports published comprise word-by-word repetition of the Code, without any further clarification or explanation of how the company has implemented the recommendations. In addition, many of the reports show little evidence of the board’s responsibility and involvement in the report.
The Norwegian Code of Practice for Corporate Governance
The Code of Practice promotes corporate governance that regulates the division of roles between shareholders, the board of directors and executive management more comprehensively than is required by legislation. The Code of Practice is issued by the Norwegian Corporate Governance Board (NCGB). NCGB monitors the need for revisions to the Code of Practice. A new version was published on 4 December 2007.
Information on corporate governance relevant to stock exchange listed companies is available on www.oslobors.no/ob/cg. Attention is also drawn to the NCGB website at www.nues.no.
