Corporate Governance Report

Svenska Spel is a Swedish limited liability company owned by the Swedish State. The administration of Svenska Spel is handled by the Unit for State Ownership within the Ministry of Finance.

State-owned companies are subject to the same legislation as private companies, such as the Swedish Companies Act, the Annual Accounts Act and the Bookkeeping Act. Companies active in certain industries may also be subject to special legislation. In the State ownership policy, the Government sets forth key issues of principle regarding corporate governance of all State-owned companies.

The decisions regarding licences that the Government grants for Svenska Spel’s operations are outlined in Svenska Spel's operations and structure. The decisions are available from Svenska Spel’s Legal Staff and on the Company’s website svenskaspel.se.

Principles underlying corporate governance

In addition to what accrues from legislation or other ordinance, the following principles apply to corporate governance at Svenska Spel:

State ownership policy

Svenska Spel observes the State ownership policy ("ownership policy"). The ownership policy is available at the Government’s website, regeringen.se.

Corporate governance of state-owned companies is stated in the ownership policy. A key aspect of governance is the Swedish Code of Corporate Governance ("The Code") shall be applied in State majority-owned companies. In certain issues, the Government justifies deviations from the Code, in compliance with the Code’s principle of "comply or explain". Examples of such deviations are the Code’s provisions regarding the preparation of decisions concerning the nomination of the Board and auditors.

The Code is available at the Swedish Corporate Governance Board, bolagsstyrning.se.

Guidelines for remuneration of senior executives

Part of the ownership policy deals with guidelines underlying the terms and conditions of employment of senior executives in State-owned companies, which the Government set on 20 April 2009. According to the State ownership policy, the Board of Directors in State-owned companies, just as in listed companies, shall propose guidelines for the remuneration of senior executives for approval, which shall be compatible with Government guidelines.

On 19 April 2011, Svenska Spel’s AGM approved the guidelines for the remuneration of senior executives. Svenska Spel applies these guidelines, which are available at Svenska Spel’s website svenskaspel.se.

Owner’s mandate

In conjunction with the AGM on 19 April 2011, the shareholder submitted information to the Board, which included the owner’s mandate for the Company.

Information on the content of the shareholder’s mandate for Svenska Spel is available at Svenska Spel’s website svenskaspel.se.

Board nomination process

The nomination of the Board members of State-owned companies is conducted in line with the principles described in the State ownership policy. These principles replace the Code’s rules and a nomination committee, as provided in the Code, does not exist.

Instead, according to the State’s ownership policy, the following apply:

  • The nomination process for Board members is run by and coordinated by the Unit for State Ownership at the Government Offices.
  • A team analysis the competency requirement based on the composition of the Board and the Company’s operations and situation.
  • Subsequently, any recruitment requirement is set and the recruitment process commences.
  • The selection of directors is made from a broad-based recruitment base.
  • When the process is finalised, the nominations are published in line with the rules of the Code.

Annual General Meeting (AGM)

In accordance with the Articles of Association, Members of Parliament are entitled to attend the AGM. The ownership policy states that the public should be invited to attend the AGM and all State-owned companies should make some form of arrangement that offers the public the opportunity to present questions to the executive management. According to the ownership policy, the report that the Board submits at the AGM regarding the application of previously decided guidelines for the remuneration of senior executives should also encompass subsidiaries.

The 2011 AGM was attended by six of the Board’s nine members plus two employee representatives.

Board

Size and composition of the Board

The Articles of Association specify that the Board is to comprise not less than three and not more than ten directors appointed by the AGM. Also, pursuant to the Swedish Act on Board Representation (1987:1245) employees in the private sector are entitled to appoint three Board members and three deputies.

According to State ownership policy, the number of Board members should normally be 6 to 8 persons, with a desired gender distribution of at least 40%.

Up to the 2011 AGM, the Board consisted of seven Board members elected by the AGM, including the Chairman. Of these members, four were women and three men. In addition, the Board had two members and two deputies appointed by the employee organisations. Following the 2011 AGM, the Board consists of eight members elected by the AGM. Of these, four are women and four are men. In addition, the Board has three members with three deputy members appointed by the employee organisations.

None of the Board members elected by the AGM work as executives in the Company or as executives in the Company’s subsidiaries. The CEO is not a Board member, but attends Board meetings. All Board members elected by the AGM are independent in relation to the Company and executive management. The Unit for State Ownership at the Government Offices makes the assessment of independence.

Board members

The section Board of Directors presents each Board member’s age, education, primary occupational experience, and other significant appointments outside the Company and when the member was elected to the Board of Svenska Spel.

The Board’s work procedures

The work of the Board is documented in the Board’s rules of procedure, which are reviewed and set at least once annually. The division of competencies among Board members, Board committees, Chairman of the Board, CEO and internal revision are expressed in the Board’s rules of procedure and in the Board’s instructions to the CEO and to the head of internal revision.

Board committees

The Board has set up two permanent committees among its members: a Remuneration Committee, and an Audit Committee. There was also a temporary Recruitment Committee in early 2011.

Audit Committee

The Audit Committee consists of three members elected by the Board annually. Since the statutory meeting in April 2011, they have been Catarina Fritz, (Chairman), Hans Bergenheim and Eva-Britt Gustafsson. In addition, one of the employee representatives is entitled to attend and participate in the Committee meetings.

Without affecting the Board’s responsibility and tasks in general, the Audit Committee’s task includes monitoring the Company’s financial reporting, monitoring the effectiveness of the Company’s internal control, internal auditing and risk management in respect of financial reporting, and to keep itself informed of the audit of the annual report and consolidated accounting.

The complete tasks of the Audit Committee are shown in Chap. 8, Section 49 of the Swedish Companies Act (2005:551).

The Board has delegated its right of decision to the Audit Committee for the focus of internal auditing, in part through preparation of annual internal auditing plans, including the budget, as well as guidelines for the non-auditing assignments that the Group may purchase from the Company’s auditors, and the appointment of internal auditors.

Internal and external auditors take part in meetings of the Audit Committee, thus enabling information to be shared on a regular basis and for coordination between the internal and external auditing work. The Company’s CFO also attends the committee’s meetings to present reports.

The Audit Committee reports after each meeting to the entire Board. During 2011, the Audit Committee held seven meetings. Attendance of the members at the committee’s meetings is shown in the section Board of Directors.

Remuneration Committee

The Remuneration Committee consists of three members elected annually by the Board. The members of the Remuneration Committee since the statutory Board meeting in April 2011 are Anitra Steen (Chairman), Michael Thorén and Christer Åberg. The CEO, HR Manager and Chief Legal Counsel also attend. In addition, one of the employee representatives is entitled to be present and participate in the Committee meetings.

In line with the Board’s work procedures, the main tasks of the Remuneration Committee comply with the Code. The Board has not delegated any right of decision to the Remuneration Committee.

In 2011, the Remuneration Committee met on four occasions. Attendance of members at Committee meetings is presented in the section Board of Directors.

Recruitment Committee

The Recruitment Committee, established in September 2010, was of a temporary nature. The committee’s main task was to prepare questions ahead of the recruitment of a new CEO, which commenced during the autumn of 2010. The committee’s work was concluded in the spring of 2011. The Committee consisted of four members selected by the Board, namely, Margareta Winberg, Chairman; Björn Fries, Lena Melinder and Martina Ravn.

In 2011 the Remuneration Committee held three meetings. Attendance of members at Committee meetings is presented in the section Board of Directors.

Work of the Board in 2011

Apart from the statutory meeting, the Board held ten meetings and three per capsulam meetings. The Board’s work focused on such matters as applications to the Government for operational licenses, the Company’s future goals and strategies, and the recruitment of a new CEO. The Board was assisted by the Board Secretary, Bengt Palmgren, who is the company’s Chief Legal Counsel.

Attendance at Board meetings is shown in the presentation on Board of Directors.

CEO

The section Executive management shows the CEO’s age, main education, work experience, important commissions outside the company and significant holdings in companies with which Svenska Spel has major business relations.

Internal control

Pursuant to the Swedish Companies Act and the Code, the Board is responsible for internal control, which means the Company shall have favourable internal control and formal routines that ensure that the set principles for financial reporting and internal control are observed. Responsibility also includes ensuring that the Company’s financial reports are drawn up in compliance with legislation, applicable accounting standards and other external requirements. According to the Code, the Board’s description of internal controls is limited to the financial reporting.

Svenska Spel uses COSO’s framework in drawing up and describing the structure of internal control. The framework comprises the following components: control environment, risk assessment, control activities, information and communications, as well as follow up.

Control environment

The basis for internal control consists of the control environment with organisation, decision-making channels, authorisation and responsibility, which are documented and communicated in governance documents.

Each year, the Board sets up the following documents that combine with legislation and other external regulations to form the framework that sets the platform of the Group’s processes for good internal control in respect of financial reporting.

  • Work procedures for the Board
  • Work procedures for the Audit Committee
  • The Board’s instructions for the CEO
  • Instructions for internal auditing
  • Policies for risk management and financial management.
  • Guidelines for attestation and for attestation and payment instructions.

Guidelines, instructions and work routines for on-going accounting, closing accounts and financial reporting are otherwise documented at the detailed level.

Risk assessment

The group’s processes for risk assessment and risk management, as well as the current risk status, are dealt with each year by the Board. The Board assesses and monitors risks and the quality of financial reporting via the Audit Committee. The Audit Committee maintains contact with the Group’s internal and external auditors to discuss risks in financial reporting.

Svenska Spel has a process for identifying, valuing and managing risks and uncertainty factors on a regular basis. Reviews are currently in progress to efficiency-enhance risk management.

The Group’s risks are compiled and valued each quarter and, effective 2011, the on-going risk assessment is integrated into the Group’s internal financial monitoring. The goal of reporting is to raise the focus on on-going risk analysis and catch significant changes in the risk profile. Reporting is to the Group senior executive management.

Risk analysis as regards risks that lead to shortcomings in financial reporting are updated. On the basis of the risk assessment, decisions are made as regards substantial risks and the controls and routines that need to be strengthened to ensure favourable control so that significant shortcomings do not extend to the annual report.

The largest and most considerable risks for the Group’s financial reporting are linked to the process for accounting for gaming-related transactions. The process is highly transaction-intensive and requires a high level of appropriate controls in the gaming system.

Control activities

Svenska Spel’s process descriptions for financial reporting include a risk assessment and the controls established for identifying risks. The process is assessed and adjusted in an effort to ensure that it complies with applicable regulations in the form of good accounting practices, applicable legislation and ordinance, as well as with other requirements.

The Group’s control function is based on an overarching staff function but each controller works close to operations and is included in the executive management groups in each business and operating area and staff. The function is responsible for ensuring that follow-up is conducted towards goals, forecasts and earlier accounting periods. Key data are studied and calculations tested and checked. Detailed analyses are made of reported data and results and are delivered in a compiled monthly report that is broken down by unit, with comments. The report is delivered to senior management and operations managers and, in selected parts, to the Board.

The joint group accounting function draws up consolidated accounting and financial reporting in close cooperation with the controller function and operational managers. The work includes built-in control activities to manage the risk of incorrect accounting of income statement and balance sheet items.

Compliance with policies, guidelines and instructions that affect financial reporting is examined and any deviations are reported to the manager in charge.

Information and communications

Governance documents in the form of policies, guidelines and significant instructions for financial reporting are presented on Svenska Spel’s intranet and updated. All employees have access to the intranet and employees directly involved are informed separately of any changes. Within the framework of the annual employee dialogue, each manager checks that the employee is updated in respect of the relevant governance documents.

Training courses are conducted a few times annually as required with new managers to ensure that information has been distributed and received in the appropriate manner.

Svenska Spel is certified according to the security standard of the WLA (World Lottery Association). The security standard also includes meeting the requirements in terms of management systems or information security in ISO/IEC 27001:2006. The standard includes requirements to ensure confidentiality, accuracy and traceability for all business-critical information. During the year, Svenska Spel focused on the goal of receiving certification according to the Payment Card Industry (PCI), which are the regulations of VISA and Master Card. PCI certification is a security and quality certification aimed at increasing data security among all parties who store, process or transfer card data. Svenska Spel received certification in line with PCI during 2011.

Follow up

The Board receives the financial information that the Group executive management provides ahead of each regular Board meeting. The Board also has access to monthly financial reporting.

Follow-up and control of the Company’s operations and financial status are conducted at the Group level and for each area of responsibility. Application of Group policies is followed up annually and reported to the Board. The unit responsible for a policy is also responsible for checking that it is observed. Reporting should indicate the emergence of any deviations.

At the statutory Board meeting of the Board in connection with the AGM, the CEO must show written proof that an examination has been made of the Group’s policies during the preceding year.

Svenska Spel has an internal audit function that reports directly to the Board’s Audit Committee. The internal audit assists the Board and CEO with independent and objective surveys aimed at proposing actions and improvement programmes. The function supports the Group’s other units in attaining their goals by evaluating process effectiveness for control, risk identification and risk control.

During autumn 2011, the Board also decided to set up a Group-wide compliance function for control in the areas of licences, personal data, marketing, gifts and benefits, as well as the prevention of money laundering and financing of terrorism.