Corporate governance

12.11.2009

Kommunal Landspensjonskasse is a mutual company and does not have owners in the traditional sense but instead has corporate members. The corporate members of KLP are all customers with public sector occupational pension schemes with the Company.

KLP's customers and corporate members are municipalities, county authorities, state health enterprises and independent businesses associated with the public sector. KLP endeavours to achieve constructive harmony between the Company's customers, controlling bodies and other stakeholders.

KLP’s corporate governance systems are to ensure that the overarching aim of creating value for the Company’s customers is achieved in an economically effective and socially responsible way.

Governance processes at KLP
Each year a strategy and planning process is carried out within the KLP Group. During this process the Group Board of Directors lays down the high level objectives and strategies for the coming planning period for the whole Group. These plans form the basis for the senior management's work to realise these objectives for each business area.

Corporate governance (Owners’ control and corporate management)
The Norwegian legislation for mutual companies and for the insurance and finance industries provide clear rules for corporate governance. For stock exchange listed companies the Norwegian recommendations for good corporate governance also apply. These recommendations articulate generally accepted principles for corporate governance and even although they do not apply to a mutual company such as KLP, KLP's corporate governance is in accordance with the recommendations as far as this is compatible with the mutual corporate model.

KLP’s governing bodies:

The General Meeting
The Company's highest authority is its General Meeting which comprises elected representatives of the Company's owners (i.e. its corporate members). The General Meeting for 2008/2010 comprises 164 delegates. These are elected from election constituencies. Each county authority together with its municipalities comprises its election constituency with the exception of Oslo which forms part of the Akerhus County constituency. Additionally, each of the regional state health enterprises with its subsidiaries forms its constituency and the remaining companies together form one election constituency. In each constituency an election meeting is held to elect delegates to the General Meeting. The number of votes is linked to the size of the customer relationship.

The General Meeting is to adopt the annual accounts, the annual report and allocation of profits or coverage of losses. It is also to elect the Control Committee and 24 of the 45 members of the Supervisory Board, as well as set the remuneration for the Supervisory Board and the Control Committee. It is also the General Meeting that decides any changes to KLP's Articles of Association.

The Supervisory Board
The Supervisory Board comprises 45 members with deputies. The General Meeting elects 24 of these. Six are nominated by the employee organisations in proportion to the numbers of their members with KLP pension entitlements. 15 representatives are elected from and by the staff in the KLP Group.

The Supervisory Board has the responsibilities of a Corporate Assembly in accordance with the Norwegian Limited Liability Companies Act. It is to supervise the Board of Directors’ and the Group Chief Executive’s management of the Company. The Supervisory Board is the Supervisory Board both for KLP and for its subsidiary, KLP Skadeforsikring AS.

The Supervisory Board elects five of the eight members of the Board of Directors. It is also to provide a statement to the General Meeting on the Board of Director's proposed accounts and on the Board of Director's proposed allocation of profits or provision for loss. It is also the Supervisory Board that selects auditors and the Election Committee as well as laying down instructions to the Control Committee.

The Election Committee
The KLP Supervisory Board elects an Election Committee of three members and a waiting member. This committee is elected for two years at a time and the members can be re-elected only twice. The members of the Board of Directors are not eligible for election. The Election Committee is to put forward proposed candidates for:

• Those members of the Supervisory Board that are elected by the General Meeting as well as the Supervisory Board’s Chair and Deputy Chair.
• The members of the Board of Directors to be elected by the Supervisory Board members elected by the General Meeting as well as the Chair of the Board of Directors and the Deputy Chair. 
• Control Committee

The Board of Directors
The KLP Board has eight members who are elected for a term of two years so that half are up for election each year. Five members and deputies are elected by the members of the Supervisory Board who are elected by the General Meeting. Two members are elected from and by the KLP staff. One member is nominated by the employee organisation or negotiating alliance with most members in KLP pension schemes. In addition two observers are appointed from those organisations that are second and third in regard to the number of members with KLP pension schemes. The Group Chief Executive Officer is not a member of the Board of Directors.

Internal and external control bodies
The Control Committee’s activities are based on instructions provided by the Supervisory Board and in accordance with the Norwegian Act on Insurance Activity. The Control Committee supervises the company's activities.

Group Internal Audit, which operates in accordance with instructions laid down by the Board of Directors, carries out operational audit and undertakes assessments of all individual units’ management and control systems. Internal Audit’s plan and annual report is made to the Board of Directors.

In addition to the Company's internal control bodies the Company is also subject to supervision by the Financial Supervisory Authority of Norway. The Financial Supervisory Authority checks that the financial institutions are run responsibly and in accordance with legislation.

Internal direction and control
The Board has laid down Board Directives and Instructions to the Group Chief Executive Officer in regard to the execution of the day-to-day management of KLP. KLP's Group Chief Executive Officer chairs the boards of directors of the most important subsidiaries in the Group (KLP Skadeforsikring, KLP Kapitalforvaltning, KLP Eiendom and KLP Bedriftspensjon). Otherwise these subsidiaries’ boards of directors comprise senior KLP managers and external board members with special qualifications in regard to the particular company.

The Board of Directors has laid down ethical guidelines for employees and employee-elected representatives in the Group. The Group CEO has laid down separate regulations for personal trading in securities. The regulations are of particular importance to employees of KLP Kapitalforvaltning as well as KLP employees with particular knowledge of the investment operation.