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 Enterprise and Innovation. State-owned companies are subject to the same legislation as private companies, such as the Swedish Companies Act, the Annual Accounts Act and the Accounting Act. Companies active in certain industries may also be subject to special legislation. The particular regulations governing Svenska Spel’s operations include the Swedish Lotteries Act, the Casinos Act and the permits issued by the Government under these acts. In addition, there are extensive rules in the form of ordinances, provisions, conditions, inspection guidelines and regulations set out by the Swedish Gambling Authority, which is the administrative authority tasked with ensuring that the gaming market in Sweden is legal, safe and reliable. 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 the section Operations. The decisions are available on the Company’s website www.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 that the Swedish Code of Corporate Governance (the “Code") must 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’s website, bolagsstyrning.se.
Guidelines for remuneration of senior executives
Part of the Ownership Policy deals with guidelines underlying the terms and conditions of employment for senior executives in State-owned companies, which the Government set on 20 April 2009. According to the Ownership Policy, the Board of Directors in State-owned companies, just as in listed companies, proposes guidelines for the remuneration of senior executives for approval, which are compatible with Government guidelines. 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 www.svenskaspel.se.
In conjunction with the AGM on 24 April 2012, the shareholder resolved on a shareholder’s directive, which included the owner’s mandate for the Company. The shareholder’s directive applies until such time as the AGM resolves otherwise. Information on the content of the shareholder’s mandate for Svenska Spel is available at Svenska Spel’s website www.svenskaspel.se.
Articles of Association
In addition to the stipulations of the Swedish Companies Act, the Articles of Association do not include any particular stipulations concerning the appointment or dismissal of Board member or amendments to the Articles of Association.
Board nomination process
The preparation of resolutions for the nomination of Board members of State-owned companies is conducted in line with the principles described in the Ownership Policy. For non-market-listed companies, these principles replace the rules under the Code. Instead, under the Ownership Policy, the following principles apply:
- The nomination process under the Government Offices of Sweden is coordinated by the Ministry of Enterprise and Innovation
- For each company, competence needs are analysed based on the company’s operations, current situation and future challenges as well as the respective boards’ composition and evaluations
- Any recruitment needs are established and the recruitment process commenced
- The selection of directors is made from a broad-based recruitment base
- The process is concluded through announcement of nominees pursuant to the Code.
Annual General Meeting
In accordance with the Articles of Association, Members of Parliament are entitled to attend the Annual General Meeting (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. All members of the Board, the Company’s auditor and the CEO attended the 2015 AGM.
Board of Directors
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 the Ownership Policy, the number of Board members should normally be six to eight persons, with a desired gender distribution of at least 40%. The Board currently consists of seven members elected by the AGM, including the Chairman. Of these, five are women and three 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.
The section Board of Directors present details including each Board member’s age, education, primary occupational experience, and other significant appointments outside the Company as well as the date 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 skills among Board members, Board committees, Chairman of the Board, CEO and internal audit are expressed in the Board’s rules of procedure and in the Board’s instructions to the CEO and to the internal auditor.
The Board has set up two permanent committees among its members: an Audit Committee and a Remuneration Committee.
The complete tasks of the Audit Committee are shown in Chap. 8, Section 49 b of the Swedish Companies Act (2005:551). The Audit Committee comprises four members who are annually elected by the Board. Since the statutory meeting in April 2015, they have been Catarina Fritz, (Chairman), Hans Bergenheim, Frank Åkerman and Hélène Westholm. In addition, one of the employee representatives is entitled to attend and participate in the Committee’s meetings.
The Audit Committee prepares the direction and budget for the internal audit, but the decision is made by the Board. The Board has delegated its right of decision to the Audit Committee for the establishment of guidelines for the non-auditing assignments that the Company may procure from the Company’s external auditors, and the appointment of internal auditors. The Company’s internal and external auditors take part in meetings of the Audit Committee, thus contributing to coordination between the internal and external auditing work. The Company’s CFO also attends the Committee’s meetings to present reports, and they are also attended by the Company’s Board Secretary. The Audit Committee reports after each meeting to the entire Board. During 2015, the Audit Committee held seven meetings. Attendance of members at Committee meetings is presented in the section Board of Directors.
The main tasks of the Remuneration Committee are set out in the Board’s rules of procedure, which comply with the Code. After the AGM, the Committee comprises three members who are annually elected by the Board. Since the statutory meeting in April 2015, they have been Anitra Steen (Chairman), Christer Åberg and Eva-Britt Gustafsson. The CEO, HR Director and the Board Secretary also attend. In addition, one of the employee representatives is entitled to attend and participate in the Committee’s meetings. The Board has not delegated any right of decision to the Remuneration Committee. In 2015, the Remuneration Committee met on three occasions. The attendance of members at Committee meetings is presented on pages 62–63.
Work of the Board in 2015
In 2015, the Board held ten meetings and one strategy seminar. The Board’s work focused on such matters as the Company’s future strategic focus, operational goals and governing parameters for follow up as well as the need for new permits, streamlining efforts and the Company’s overriding sustainability efforts. The Board was assisted by the Board Secretary. Attendance at Board meetings is shown in the presentation of the Board of Directors.
The Board has carried out an annual evaluation of the Board’s work. The evaluation was conducted as a self-evaluation in the form of a survey comprising a total of 37 questions on six issues. The result of the evaluation has been presented to the Government Offices of Sweden.
The CEO’s relevant details are shown in the Management section.
Pursuant to the Swedish Companies Act and the Code, the Board is responsible for ensuring that the Company applies 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. 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 communication, as well as follow up.
The control environment comprises the basis for internal control and takes the shape of the organisation, decision-making channels, authorisations and responsibility, which have been documented and communicated in governance documents, but also in ethical and moral policies that, at Svenska Spel, are imparted through clear initiatives with values and a code of conduct, among other measures. 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
- Risk management policy
- Finance policy
- Guidelines for attestation and payment
Procedural descriptions, instructions and work routines for ongoing accounting, closing accounts and financial reporting are otherwise documented at a detailed level.
Taking a structured approach to risks and risk management enables Svenska Spel to ensure sound internal control. The accounts department performs continuous financial risk assessments and identifies and measures any need for improvement measures to ensure the quality of financial reporting. The Board assesses and monitors risks and the quality of financial reporting through the Audit Committee. The Audit Committee annually performs risk analyses for the financial reporting, which are also compared with the analyses of the external audit and the Company’s identified risks. Based on a compiled assessment, decisions are made concerning which risks are significant, which areas the Audit Committee wants to review in detail and what possible actions must be taken to ensure sound internal control.
Control actions are identified and designed to address the identified risks and to take action in the areas that have the greatest risk of significant errors. Control actions are defined as activities to reduce the probability and/or consequences of a certain risk. This involves general and more overriding activities, such as process descriptions, the delegation of roles and responsibility, attestation procedures, reconciliations and follow-ups, and area-specific controls and/or system controls. Svenska Spel’s processes related to the financial reporting encompass risk assessment, process description, roles and responsibility and the controls that are established to manage identified risks. The processes and procedures are continuously evaluated and adapted with the aim of corresponding to the applicable regulatory framework in the form of generally accepted accounting principles, the applicable laws and regulations, as well as other external requirements. The joint Group accounting function prepares the consolidated financial statements and financial reporting. This 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 are ensured through regular controls and any deviations are reported to the manager in charge. The policies and guidelines for attestation and payment are adopted annually by the Board.
Information and communication
Well-functioning channels for communicating the management's view on the governance of financial reporting and internal controls are a prerequisite for informing all employees how to behave and act on various matters. Governing documents in the form of policies, guidelines and instructions, which are of significance in the financial reporting are available on Svenska Spel’s intranet. Each employee is responsible for seeking information and continuously staying up-to-date on relevant governing documents. In addition, in conjunction with annual performance reviews, each manager is responsible for ensuring the employees understand and comply with applicable policies, guidelines and instructions. The induction of new employees includes presenting the Group’s governing policies and showing where these are available. Significant financial information is only handled by authorised personnel and clear rules are in place for what to publish and when.
All information about the organisation’s various operations must regularly be evaluated and followed up. Part of this includes following up control activities in the financial reporting. The Group's Controller function is organised in a Group-wide unit, although each controller works in close cooperation with the operations and is a member of the management teams in each business area/operating area. The function is responsible for follow-ups being conducted in terms of targets, budgets, forecasts and previous reporting periods. Key indicators are reviewed and calculations are followed up. In-depth analyses are performed on recognised figures and results and delivered in the form of a compiled monthly report divided by unit and including comments. The report is delivered to management and supervisors, and selected sections are delivered to the Board. The Board is provided with financial information in conjunction with each Board meeting and in the monthly report from the CEO. The Board also has access to monthly financial reporting through a special Board portal.
At Svenska Spel’s Board meeting in December, the CEO presented to the Board, in writing, the reviews that were conducted on the Group’s policies in the past year. The Group’s legal department is responsible for coordinating the annual report to the Board. The unit that is responsible for a policy is also responsible for ensuring compliance with it and that the reporting indicates whether there have been any significant deviations.
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 achieving their goals by evaluating process effectiveness for control and risk identification.
Deviations from the Code
Svenska Spel applies the Code with the deviations listed below.
|Section 2.1–2.7 The Company is to have a Nomination Committee that represents the Company’s shareholder.||No nomination committee has been established as set out in rules 2.1–2.7 of the Code.||The Board nomination process is run and coordinated by the Ministry of Enterprise and Innovation.|
|Rule 10.2 The Corporate Governance Report must include information on whether or not the Board members are independent in their relationship to the Company, executive management and major shareholders, respectively.||The dependency relationship to the Company, executive management and major shareholders is not reported.||The ownership policy of the State specifies that the relevant provisions in the Code primarily aim to protect minority shareholders in companies with broad-based ownership. It is not necessary for companies that are wholly owned by the State to declare independence in this manner.|