Corporate governance report 2023

Corporate governance in NIBE Industrier AB (publ) (NIBE) is exercised through the Annual General Meeting, the Board of Directors and the CEO in accordance with the Swedish Companies Act (2005:551), the company’s Articles of Association, the Swedish Annual Accounts Act (1995:1554), Nasdaq Stockholm’s Rules for Issuers, and good practice on the stock market. It is good practice for Swedish companies whose shares are traded on regulated markets to comply with the Swedish Corporate Governance Code (the Code). NIBE complies with the Code, and this corporate governance report has been drawn up in accordance with the Code. The current Code may be accessed on the Swedish Corporate Governance Board’s website, www.bolagsstyrning.se. In addition, NIBE also provides information on the company’s website in accordance with the Market Abuse Regulation and other legal requirements. The corporate governance report is not part of the formal annual report documents. The company’s auditors have examined the corporate governance report, and it is their opinion that the corporate governance report has been properly drawn up and that the statutory information in the report is consistent with other parts of the annual report and consolidated financial statements.

Ownership

NIBE has its registered office in Markaryd, Sweden, and has been listed on Nasdaq Stockholm since 1997.

NIBE class B shares have also had a secondary listing on the SIX Swiss Exchange since August 2011. On December 31, 2023, NIBE had 160,650 registered shareholders, excluding previous shareholders in Schulthess Group AG who have become shareholders in NIBE. As the Swiss authorities do not report any details relating to individual shareholders in Switzerland to NIBE, it is not possible to determine the total number of shareholders.

The ten largest shareholders comprise the constellations of “current and former board members and senior executives” with a total of 20% of the capital and 46% of voting rights, followed by the Schörling family, which holds 7% of the capital and 19% of the voting rights, and eight institutional investors with a total of 25% of the capital and 12% of the voting rights. Together these ten constellations of investors hold a total of 52% of the capital in the company and 77% of the votes. No individual shareholder has a direct or indirect shareholding which represents at least 10% of the number of votes of all shares in NIBE.

Annual General Meeting

The Annual General Meeting (AGM) is NIBE’s highest decision-making body. The AGM determines the number of Board members and auditors, adopts the accounts, makes decisions on dividends and other appropriations of profit/loss, and discharges the Board of Directors and CEO from liability.

The most recent AGM on May 16, 2023 in Markaryd was attended by 1,859 shareholders, 713 of which attended in person, and 1,146 of which attended through proxies. 62% of the shares and 81% of the total number of votes in the company were represented. The AGM was attended by the Board of Directors, the CEO and the company’s auditors. The minutes of the AGM and the company’s Articles of Association are available on the company’s website.

There are no limitations in the articles of association as to the number of votes a shareholder may hold at a general meeting of the company. Nor are there any provisions on the appointment or dismissal of directors of the company, or changes to the company’s articles of association.

The 2023 AGM gave the Board of Directors a mandate to issue new class B shares in the company, on one or more occasions and with or without derogation from the shareholders’ preferential rights, to be used to finance the acquisition of companies or businesses. This mandate is valid until the 2024 AGM and is restricted to a maximum of 10% of the number of shares issued at the time of the AGM.

Communication with the stock market

The ambition is to maintain a high standard of information issued by the company to the stock market. Such information must be accurate and transparent to create long-term confidence in the company.

Earnings and the financial position are presented quarterly and, like the annual report, are issued to all shareholders who request a copy. All information that may have an effect on the company’s share price and information on all acquisitions is announced via press releases. All financial information is also available on the website, www.nibe.com. Press releases and reports are posted there at the same time as they are made public.

Press and financial analyst conferences are held when quarterly reports are published. There is also continuous dialogue with Swedish and foreign investors and financial analysts, the media and Aktiespararna, the Swedish Shareholders’ Association.

Board procedures

The NIBE Board of Directors consists of six members, elected by the AGM. Directors and the Chairman of the Board are elected annually by the AGM to serve for the period until the next AGM. Company employees participate in Board meetings as required to submit reports or to contribute expert knowledge in individual matters. T

he Board of Directors elected by the 2023 AGM comprised Hans Linnarson (Chairman), Georg Brunstam, Anders Pålsson, Jenny Larsson, Eva Karlsson and Eva Thunholm, as well as & CEO Gerteric Lindquist. Georg Brunstam, a director since 2003, passed away in September 2023. This means that the number of directors now amounts to six, instead of the seven elected at the 2023 AGM. With the exception of the Managing Director & CEO, none of the directors is employed by the Company or has any operational responsibilities in the Company.

It is the opinion of the Board of Directors that all directors are independent in relation to the Company, with the exception of the Managing Director & CEO. A presentation of the Board members can be found on page 190.

The work of the Board is governed by formal rules of procedure adopted annually to regulate the decision-making processes within the company, authority to sign for the company, meetings of the Board and the duties of the Chairman of the Board. The Board of Directors has not otherwise distributed responsibilities among its members. However, some Board members are more familiar with certain matters than others due to their particular expertise and experience.

The Board of Directors oversees the work of the CEO and is responsible for ensuring that the organization, management and administrative guidelines for the company’s funds are suitable for the purpose. The Board is also responsible for developing and monitoring the company’s strategies through plans and objectives, decisions on acquisitions, major investments, appointments to managerial positions and the continual supervision of operations during the year. In addition, the Board sets the budget and is responsible for the annual accounts. The Chairman leads the work of the Board and ensures that it is carried out in accordance with the Swedish Companies Act and other relevant legislation. The Chairman follows the progress of operations through consultations with the CEO, and is responsible for ensuring that other members of the Board receive the information they need to hold discussions of a high quality and make the best possible decisions.

The Board of Directors evaluates its work every year. The evaluation is carried out by means of a survey of the directors. The results of the survey are then presented to the full Board, which uses them to make specific proposals on how its work can be developed, improved and made more efficient, where necessary. The Board evaluation for 2023 revealed an open, constructive climate with well-functioning control and decision-making processes. The areas covered by the evaluation included the composition, working methods, communication and internal control of the Board, the Board’s evaluation of the CEO and other company management, and the need for committees.

The work of the Board in 2023

The agenda includes several standing items, which are considered at every meeting.

Status report

Report of significant events affecting operations that have not been listed in the written report that has been circulated.

Financial report

Review of the financial information circulated.

Investments

Decisions regarding investments exceeding SEK 20 million, based on the data circulated.

Legal processes

Review of new or ongoing legal processes, where appropriate.

Acquisitions

Report on ongoing discussions and decisions concerning the acquisition of companies, as and when appropriate.

Press releases, etc. When appropriate, a review of proposals for external reports to be published after the meeting.

Internal control

Report on the internal control work.

Every ordinary board meeting focuses on one principal topic of discussion

February

Financial statements

The meeting in February considers the financial statements for the preceding year. The company auditor presents his comments to the entire Board of Directors on this occasion.

May

Inaugural meeting

Following the AGM, the Board of Directors holds its inaugural meeting, at which the Board discusses the rules of procedure and determines who has authority to sign for the company.

August

Strategy

In August, the Board holds strategic discussions over two working days.

November

Auditor’s review

November, the company’s auditor gives his view on the interim figures for the period January to September.

December

Budget

At the end of the year, the Board discusses the Group’s budget for the coming year.

Decision-making process

The NIBE Board deals with all matters of significance.

Issues such as the composition of the Board and directors’ fees are dealt with once a year prior to the AGM, when the Chairman of the Board contacts major shareholders personally.

The company’s auditor makes his report to the Board as a whole. The company does not have a nomination committee (Section III, item 2.1, of the Code), a remuneration committee (Section III, item 7.3, of the Code) or an audit committee (Section III, item 7.2, of the Code). NIBE does not comply with the Code in respect of nominations because of the clear ownership structure with two principal shareholder constellations, which together control 65% of the company’s votes, and which also enjoy mutually cordial relations. The Board of Directors is not too large to carry out the tasks of the audit and remuneration committees and possesses the necessary expertise, which is consistent with the Swedish Companies Act and the Code. The CEO (who is also a Board member) does not participate in the Board’s work on the tasks that are otherwise performed by a remuneration committee.

Group management

The Managing Director & CEO, who is also appointed by the Board of Directors as Managing Director of the parent, exercises day-to-day control of the Group, and the three heads of the Group’s business areas report to him.

The CEO leads operations in accordance with the instructions adopted by the Board in respect of the division of duties between the Board and the CEO. The work of the CEO and of Group management is evaluated annually.

Financing, currency management, corporate acquisitions, new establishments, financial control, financial information, human resources policy, sustainability and other overall policy matters are coordinated at Group level.

Governance of business areas

NIBE consists of three business areas.

Each business area has its own operational management with profit responsibility. Each business area has a Business Area Board chaired by the Managing Director & CEO. Each Business Area Board, in addition to responsibility for day-to-day operations, is also responsible to the NIBE Board of Directors for the strategic development of its respective business area. Each Business Area Board meets once per quarter.

Governance of the Group’s sustainability management

The Group’s sustainability workgroup reports to the Sustainability Council which, in addition to the workgroup, consists of the CEO, CFO and business area managers.

Much of the work is regulated in national legislation, such as environmental laws and labor law, but NIBE is also obliged to comply with regional and international law. In addition, NIBE is governed by voluntary commitments such as the UN Global Compact and the UN Sustainable Development Goals/Agenda 2030

NIBE’s Board has the ultimate responsibility for ensuring that risks are managed and that sustainability initiatives comply with the requirements of authorities, shareholders and other stakeholders. The CEO reports to the Board. The heads of the business areas are responsible for communicating and implementing their strategic work at the local board level.

The management of each company is responsible for local operational sustainability work and for compliance with Group guidelines. These managers report to the heads of the business areas in each area.

The sustainability workgroup regularly visits companies in the Group to monitor compliance with common policies and guidelines. The workgroup also works strategically and reports on sustainability issues to the Boards at Group and business area level.

Any need for improvement or nonconformities are documented and reported to the individual company, heads of business areas and Group management. Each business area head is responsible for ensuring that measures proposed are taken.

Code of Conduct

NIBE has a code of conduct that reflects the NIBE culture and the ten principles of the UN Global Compact.

The Code of Conduct is reflected in NIBE’s documents on business principles, values and working methods and the content of these is based on a long tradition of honest and sincere business practices. The information can be found on pages 12–13.

All employees receive the printed version in the local language. When a new company joins the Group, its management is obliged to communicate and implement the Code of Conduct in the organization.

The Code of Conduct is available to external parties and stakeholders on NIBE’s website at nibe.com.

All businesses comply with national legislation regarding financial, environmental and labor legislation, and are also obliged to comply with regional and international law and voluntary commitments such as the UN Global Compact. Management is responsible for seeking advice on ethical and legal behavior according to established escalation procedures when their knowledge or mandate is insufficient.

NIBE has a whistleblower function through which all Group employees and others can confidentially report suspicions of serious irregularities without risk of retaliation. To ensure the anonymity of the whistleblower and the proper, secure handling of submissions, whistleblower cases go directly to an external recipient who also leads the investigation of the case.

Policy for composition of Board of Directors/diversity policy

NIBE has adopted a diversity policy for the Board.

NIBE’s Board of Directors must have overall expertise and experience that is appropriate to its work and the business that is conducted, as well as to be able to identify and analyze opportunities for and risks to the Group. When new directors are nominated and elected, it is necessary to consider each director’s suitability to obtain a Board of Directors with the overall expertise required for appropriate governance of the Group. The composition of the Board of Directors must be characterized by versatility and breadth in terms of the expertise, experience, gender, age, education and professional background of the directors elected. The objective of the policy is to achieve an appropriate composition of the Board as regards the company’s operations and relationships in general. In 2023, the composition of the Board was evaluated within the framework of the Board’s own annual evaluation (presented above under ‘Board procedures’) and taking into account the diversity policy for the Board. The result of the evaluation is that the composition of the Board is deemed compliant with the policy.

Remuneration 2023

The 2023 AGM resolved that fees to the Board of Directors and fees to the auditors would be paid according to approved invoice.

At the same time, policies for the remuneration of the CEO and other senior executives were detailed and approved. Further information about the principles that apply can be found in Note 6 to the annual report and on NIBE’s website at www.nibe.com.

Remuneration of the CEO is a matter decided by the Board, but the preparatory work for this decision is undertaken by the Chairman of the Board after discussions with the CEO. Remuneration of other senior executives is determined by the CEO in consultation with the Chairman of the Board and in accordance with the guidelines adopted by the AGM. Decisions in this regard are reported to the Board of Directors.

Information on Board fees and salaries and other remuneration paid to the CEO and other senior executives can be found in Note 6 to the annual report.

Incentive program

Under an incentive program, certain key employees are paid variable remuneration if set targets are met.

The variable bonus is limited to a maximum of four months’ salary. It is also possible for an additional month’s salary to be paid on condition that this additional payment plus another monthly salary paid as a variable bonus or part of a variable bonus is used to purchase NIBE shares on the stock market. The additional remuneration is conditional on the employee retaining the annually acquired NIBE shares for at least three years. Under normal circumstances, the acquisition of NIBE shares by the employees concerned shall take place once a year in February/March and shall be subject to the applicable market abuse regulations. No incentive program is offered to the CEO. Certain key individuals in the foreign companies acquired in recent years have incentive programs that deviate from the NIBE Group’s remuneration principles set out above. Further information about the principles that apply for senior executives can be found in Note 6 to the annual report.

The work of the Board in 2023

The agenda includes several standing items, which are considered at every meeting.

Status report
Report of significant events affecting operations that have not been listed in the written report that has been circulated.

Financial report
Review of the financial information circulated.

Investments
Decisions regarding investments exceeding SEK 10 million, based on the data circulated.

Legal processes
Review of new or ongoing legal processes, where appropriate.

Acquisitions
Report on ongoing discussions and decisions concerning the acquisition of companies, as and when appropriate.

Press releases, etc.
When appropriate, a review of proposals for external reports to be published after the meeting.

Internal control
Report on the internal control work

Every ordinary board meeting focuses on one principal topic of discussion

February

Financial statements
The meeting in February considers the financial statements for the preceding year. The company auditor presents his comments to the entire Board of Directors on this occasion.

May

Inaugural meeting
Following the AGM, the Board of Directors holds its inaugural meeting, at which the Board discusses the rules of procedure and determines who has authority to sign for the company.

August

Strategy 
In August, the Board holds strategic discussions over two working days.

November

Auditor’s review
November, the company’s auditor gives his view on the interim figures for the period January to September.

December

Budget 
At the end of the year, the Board discusses the Group’s budget for the coming year.