Annual report 2009
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Corporate Governance

Odfjell strives to protect and enhance shareholders’ equity through long-term profitable business activities. Sound corporate governance is a central element in our strategy. This chapter describes the legal and operational limitations as to how Odfjell is governed. The Company’s aim is to create sustainable values
for shareholders and stakeholders alike. The Company is a SE (Societas Europea) company subject to Act no. 14 of 1 April 2005 relating to European companies, and listed on the Oslo Stock Exchange and subject to Norwegian securities legislation and stock exchange regulations.

REPORTING ON CORPORATE GOVERNANCE

According to decision made by the Board, the framework for corporate governance is The Norwegian Code of Practice for Corporate Governance of 21 October 2009. The code builds on a “comply or explain” principle, which means that possible deviations from the code shall be explained. Odfjell’s shareholder structure, where the founder’s family controls about 50% of the votes at the general shareholders’ meeting, is such that certain of the
code’s provisions are not implemented, in full. Odfjell is committed to ethical business practices, honesty, fair dealing and full compliance with all laws affecting our business. This includes adherence to high standards of corporate governance throughout the Group. Odfjell has developed its own corporate Code of Conduct, which focuses on good ethical behaviour in everyday business activities. All Odfjell employees are obliged to comply with our Code of Conduct.

Below we comment on Odfjell’s compliance as to each of the elements of the code, and the reasons for deviations, if
any, are explained.

THE BUSINESS

Article 1 of Odfjell’s Articles of Association states: The object of the Company is to engage in shipowning and related
activities, including the transportation of freight on the Company’s own vessels or chartered vessels, the conclusion of freight contracts, co-ownership agreements and cooperation agreements, as well as taking part in share subscriptions and making partnership contributions, or in any other way establish or participating in other enterprises which may be significant to the development of the Company.

Further articles may be found on our website www.odfjell.com. The Company’s Mission Statement and strategy is to be found on page 2 and 4 in this Annual Report.

EQUITY AND DIVIDENDS

Equity

Odfjell shall maintain an equity base deemed sufficient to support the Company’s objectives and strategy, and shall
be sufficient to withstand a prolonged period of adverse conditions in our markets. The target is that the equity shall remain between 30 and 35% of total assets.

Dividend policy

Odfjell aims to provide competitive long-term return on the investments for its shareholders. The Company emphasises an investor friendly dividend policy based upon fi nancial performance, current capital expenditure programmes and tax positions. The Company strives for semiannual dividend payments.

Capital increase

The Board has not been assigned authority to issue new shares.

Purchase of treasury shares

The Annual General Meeting on 5 May 2009 authorized the Board of Directors to acquire treasury shares of up to 10% of the Company’s outstanding shares, at a minimum price of NOK 2.50 (par value) and a maximum price of NOK 250 per share. This authorization expires 5 November 2010. A renewal of this authorization for another 18 months will be recommended to the shareholders at the General Meeting in May 2010.

EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES

Class of shares

Odfjell has two classes of shares. The A-shares each carry one vote at the Company’s general meetings. Owners of B-shares have no voting rights. In all other respect, the two classes of shares have equal rights. The shares are registered with the Norwegian Registry of Securities.

Trading in treasury shares

Treasury shares are acquired in the market and trades are reported to the Oslo Stock Exchange.

Transactions with close associates

Certain transactions are entered into with close associates. Such transactions are carried out as part of the ordinary course of business; at commercially reasonable market terms.

Guidelines for Directors and Corporate Management

The Board has established a policy in respect of stock trading. The policy is in line with the Guidelines for Insiders issued by the Oslo Stock Exchange and applies to the Board, the President/CEO, the Senior Management and other employees who in connection with their work may gain access to price sensitive and non-public information.

FREELY NEGOTIABLE SHARES

The shares are freely negotiable. The Articles of Association place no restrictions on negotiability.

GENERAL MEETINGS

The Board is responsible for calling both annual and extraordinary general meetings. The Annual General Meeting is held in May each year and 14 days’ written notice is given. A notice is also published on the Oslo Stock Exchange and on the Company’s website at least 21 days ahead of the General Meeting. Shareholders who wish to attend the General Meeting must notify the Company no later than five days before the General Meeting. It is possible to register for the Annual General Meeting by mail and telefax.

The Notice shall provide sufficient information on all matters to be considered at the General Meeting, voting instructions and opportunity to vote by proxy. Matters at the General Meeting are restricted to those set forth in the agenda.

Each class A-share carries one vote. All resolutions are adopted by simple majority unless otherwise decided.

Representatives of the Board and the auditor participate in the Annual General Meeting. Management is represented by the President/CEO and the Chief Financial Officer. The Chairman of the Board chairs the Annual General Meeting. The minutes of the General Annual Meetings are available on the corporate website.

The financial calendar is published on Oslo Stock Exchange, on www.odfjell.com and in the Annual Report.

The following matters shall be the business of the Annual General Meeting:

  • Adoption of the annual accounts and balance sheet.
  • Application of the year’s profit or coverage of the year’s loss in accordance with the adopted balance sheet, and the declaration of dividend.
  • Adoption of the remuneration of the Board of Directors.
  • Statement on salary and other benefits to the Management.

Issues which shareholders want considered at a General Meeting, must be submitted in writing to the Board of Directors in time to be included in the notice of the General Meeting. Extraordinary general meetings may be called in accordance with the provision of the Limited Liability Companies Act.

NOMINATION COMMITTEE

Odfjell SE has not established a Nomination Committee. The Board has evaluated the possibility of establishing a Nomination Committee, but has concluded such a committee would hardly bring about added quality or value.

CORPORATE ASSEMBLY AND BOARD OF DIRECTORS: COMPOSITION AND INDEPENDENCE

The Company has no Corporate Assembly. The Annual General Meeting elects the Board. The interests of the employees are being met by an agreement between the employees and Odfjell for the involvement of employees. The employees have established a permanent Employee Representatives Body (ERB). The ERB consists of up to six representatives, partly from our tank terminal in Rotterdam, the main offi ce in Bergen and the Officers’ Council. The scope of information and consulting procedures shall be on transnational issues, which concerns the group of employees either in the Company or in one or more of the subsidiaries.

Additionally, employee involvement is secured by various committees and councils at corporate level and in most subsidiaries abroad, in which management and representatives from the employees, both onshore and seafarers, meet to discuss relevant issues.

According to the Articles of Association the Company shall have a Board composed of a minimum of five and a maximum of seven members. The members are elected by the shareholders at the Annual General Meeting.

In the Annual General Meeting held on 5 May 2009, the shareholders changed the composition of Directors: Reidar
Lien was replaced by Terje Storeng who retired from the position as President/ CEO of Odfjell SE. The members of the Board are elected for two years at a time. Bernt Daniel Odfjell is the current Chairman of the Board. The Chairman has been delegated additional tasks by the Board, and consequently acts as Executive Chairman. Bernt Daniel Odfjell represents the Odfjell family, the largest shareholder of Odfjell SE. Board member Ilias A. Iliopoulos represents Chemlog Holdings Ltd., the second largest shareholder. Terje Storeng, Marianna Moschou and Irene Waage Basili are independent Board members. Great caution is taken to avoid any conflict of interest in issues
with related parties. In this connection the independent Board members represent valuable external viewpoints.

THE WORK OF THE BOARD

Ultimately the Board is responsible for the Company’s objectives, and the means of achieving them. Thus, the Board of Directors determines the strategic direction of the Company and decides on matters, which in relation to the Company’s overall activities are of significant nature. Such matters include confirmation of the strategic guidelines, approval of the budgets as well as decisions on major investments and divestments. Furthermore, the Board ensures a correct capital structure and defines the shareholder policy, including the dividend policy. The Board also appoints and determines the remuneration of the President/CEO.

It is the responsibility of the Board to ensure that the Company’s management and employees operate in a safe, legal and ethically responsible manner. To emphasise the importance of these issues, an Odfjell Code of Conduct document has been communicated throughout the organisation. The Code focuses on aspects of ethical behaviour in everyday business activities. All issues are dealt with in plenary meetings.

An Audit Committee will be established after the General Meeting in May 2010. The Audit Committee shall be elected by the Board and among the Board members. Managers that are Board members cannot be elected. At least one member shall be independent of the Company and have qualifications within accounting or auditing. The Audit Committee is responsible towards the Board, and acts as a preparatory and advisory working committee for the Board. The establishment of the Audit Committee does not alter the Board’s legal responsibilities or tasks.

The Board held seven regular meetings in 2009. Apart from ongoing business, four of the meetings dealt with the
quarterly financial reports, one covered strategic matters and one meeting reviewed and approved next year’s budget. The auditor participated in the meeting of the Board of Directors that dealt with the annual accounts. One meeting is always held in May, in connection with the Annual General Meeting. The Annual General Meeting represents an occasion for the Board to meet and discuss with shareholders face-to-face and to decide on important issues such as the appointment of the auditors, dividend payments, and the election or re-election of Board members.

In addition to the regular Board meetings, the Board may also hold special meetings, either by telephone conference
or by written resolution at the request of the Chairman, the President/CEO or by any two Board members.

The Board has not made any formal evaluation of its work.

Risk management and internal control

The Board of Odfjell is kept updated on management and company activities through reporting systems, including
monthly financial statements. QHSE is a fixed item on the Board’s agenda. The Company is also subject to external control functions such as by the auditors, the ship classification societies, port and flag state control, and other regulatory bodies like IMO, ISM Codes, etc.

The Compliance Officer of Odfjell monitors that the Company acts in accordance with applicable law and regulations. Particular focus has been applied to competition law compliance, and regular updates are given to all relevant personnel.

INFORMATION AND COMMUNICATION

Odfjell presents preliminary annual accounts early February. The complete accounts, the Directors’ Report and the Annual Report are sent to shareholders and other stakeholders late March. Odfjell presents its accounts on a quarterly basis. The Financial Calendar is published on the Oslo Stock Exchange, on the corporate website and in the Annual Report. All shareholders are treated equally with regards to information.

Open investor presentations are conducted at least two times per year in connection with Odfjell’s quarterly reports.
The President/CEO reviews and comments results on markets and prospects. Odfjell’s CFO also participates in these presentations. The presentations of the Annual and Quarterly Reports are published at the Oslo Stock Exchange and posted on the corporate website at the same time as they are presented. The annual and mid-year results are presented in a live presentation in Oslo or Bergen, whereas reports from first and third quarters are made available through webcasts. Odfjell also maintains an ongoing dialog with, and make presentations for certain analysts and investors. Care is taken to maintain an impartial distribution of information when dealing with
shareholders and analysts.

TAKE-OVERS

There are no defence mechanism against take-over bids in Odfjell’s Articles of Association, nor have other measures been implemented to limit opportunities to acquire shares in the Company.

AUDITOR

The auditor prepares an annual plan for the audit. The auditor is present during the Board’s discussion of the annual financial statements. At the meeting, the Board is briefed on the annual accounts and any other issues of particular concern to the auditor and Management. The Board has a special session with the auditor without presence of the Management. The auditor submits to the Board a written statement on fulfilment of the Statutory Audit Independence and Objectivity requirement in accordance with the Auditing and Auditors Act.

In order to secure consistency in control and audits of the Group, Odfjell generally uses the same audit firm for all subsidiaries worldwide, and has hired Ernst & Young as the Company’s independent auditor.