Corporate Governance in D/S NORDEN

Corporate Governance in D/S NORDEN Contents: 1. The role of the shareholders and their interaction with the management of the company... 2 2. The role of the stakeholders and their importance to the company... 3 3. Openness and transparency (1)... 4 4. The tasks and responsibilities of the Board of Directors (1)... 6 5. The composition of the Board of Directors (1)... 8 6. Remuneration of the members of the Board of Directors and the Management (1)... 13 7. Risk management... 16 8. Audit... 17 D/S NORDEN: Corporate Governance December 2009 1

Guide: full compliance; partial compliance; other practice in NORDEN 1. The role of the shareholders and their interaction with the management of the company 1. Exercise of ownership and communication The Committee recommends that the companies NORDEN web- and audio casts the annual general contribute to improving the communication between the meeting and the Board of Management s presentation of company and the shareholders, and between the individual the 4 interim reports. On the website, shareholders can also shareholders in the company via the use of e.g. information find updated information on the Company and its activities technology. and, in addition, the shareholders as well as other stakeholders can regularly receive company announcements Comment: This may motivate the shareholders to exercise and other information. their rights and to use their influence. 2. Capital and share structures The Board of Directors assesses the capital and share assess, at appropriate intervals, whether the company s structure on a regular basis and always in connection with capital and share structures continue to be in the interests the preparation of the Company s strategy and budgets as of the shareholders and the company and that the Board of well as the proposed distribution of profit. The assessment Directors accounts for this assessment in the company s is included in the annual report. annual report. 3. Preparations for the general meeting, including notice of meeting and proxy The Committee recommends that the general meeting be convened at sufficient notice to enable the shareholders to prepare for the meeting and consider the business to be transacted at the general meeting, that the notice of meeting, including the agenda, be drawn up in such a way as to give the shareholders a satisfactory picture of the business covered by the items on the agenda and that proxies given to a company s Board of Directors, as far as possible, include the position of the shareholders regarding each item on the agenda. The annual general meeting is convened at 2-4 weeks notice. The agenda includes a statement explaining the individual items. Proxies are differentiated so that the shareholders may consider each individual item on the agenda. Comment: Pursuant to the Danish Companies Act, proxies given to a company s Board of Directors shall be limited to one particular general meeting. 4. The duties of the Board of Directors and the right of the shareholders in the event of takeover bids In connection with a public takeover bid, the Committee recommends that in such situations, the Board of Directors do not, without the acceptance of the general meeting or on its own, attempt to counter a takeover bid by making decisions which in reality prevent the shareholders from deciding on the takeover bid. Comment: It is important that the shareholders are given the opportunity to decide whether or not they wish to dispose of their shares in the company under the terms offered. The decisions not recommended include implementing capital increases or allowing the company to buy its own shares on the basis of any previously given authority. NORDEN has no formal procedures in relation to the role of the Board of Directors in a takeover bid, but in the event of this, the Board of Directors will act in the best interests of the shareholders and will not make any decisions which in reality will prevent the shareholders from deciding on the takeover bid. For the same reason, NORDEN has no limitations on voting rights or the liquidity of the shares. D/S NORDEN: Corporate Governance December 2009 2

2. The role of the stakeholders and their importance to the company 1. The company s policy in relation to the stakeholders adopt a policy on the company s relationship with its stakeholders. Comment: Such a policy could for example include the company s business concept, its basic values and objectives, and one element could be guidelines for the company s publication of information about environmental and social issues. 2. The role of the stakeholders and their interests ensure that the interests and roles of the stakeholders are respected in accordance with the company s policy on such issues. Comment: As part of this purpose, it is natural that the Board of Directors ensures that the Management and the company s stakeholders are in active dialogue in order to develop and strengthen the company. NORDEN has no formulated policy on the relationship with its stakeholders. However, the relationship with stakeholders - customers, partners, shareholders and employees, etc. - is very central to NORDEN s mission and values. NORDEN has a specific IR policy on what information to publish through the stock exchange. See above. D/S NORDEN: Corporate Governance December 2009 3

3. Openness and transparency (1) 1. Information and publication of information adopt an information and communication policy. Furthermore, the Committee recommends that the company draw up procedures to ensure immediate publication of all essential information of importance for how the shareholders and the financial markets evaluate the company and its activities as well as its business goals, strategies and results in a reliable and sufficient manner unless publication can be omitted according to stock exchange legal rules. NORDEN has an IR policy that governs the communication to the share market. The policy is available on the website. NORDEN has drawn up procedures to ensure that the Company abides by the stock exchange code of ethics and keeps a high level of information. The Committee recommends that information be published in both Danish and English, and, if necessary, in any other relevant languages; this also applies to the company s website, which must display identical information in these languages. 2. Investor relations lay the groundwork for an ongoing dialogue between the company and the company s shareholders and potential shareholders. Comment: Such dialogue can take place in the following ways: Holding investor meetings. Evaluating on an ongoing basis whether information technology can be used for improving investor relations, including using part of the company s website to deal with corporate governance-related issues. Making all investor presentations accessible on the Internet at the same time as they are made. 3. Annual report consider to what extent generally accepted accounting standards other than those required, such as US-GAAP, shall be applied as a supplement to the annual report if trade conditions or other circumstances make this relevant in relation to the information needs of the recipients, including the need for comparability. All announcements are published in both Danish and English. The website is primarily in English, but there are extensive excerpts of the website written in Danish. Parts of the contents can also be found in Chinese, Spanish, Portuguese and Japanese. With a number of activities, NORDEN seeks to enter into a sensible dialogue with both existing and potential shareholders. These activities include: Holding and participating in investor meetings. Conducting a number of annual audio- and webcasts, at 4 of which it is possible to ask the Board of Management questions. Uploading investor presentations on the website along with all announcements and other relevant information. Covering corporate governance by having a separate section on this topic on the website. NORDEN sees no need to supplement IAS with other accounting standards. However, the Board of Directors continuously considers the relevance of providing supplemental information in the reports, and the company already provides a large amount of supplemental information. In order for the annual report to present a true and fair view as well as be comparable to the rest of the industry, NORDEN reports in USD. D/S NORDEN: Corporate Governance December 2009 4

3. Openness and transparency (2) In connection with the preparation of the annual report, the Committee recommends that the Board of Directors decide whether it is expedient that the company publishes details of a non-financial nature, even in instances where this is not required by any applicable legislation or standards. Comment: The annual report must in all circumstances meet the highest standards applicable to the class to which the company belongs and must reflect changes in generally accepted accounting principles. Examples of details of a non-financial nature could be information about the company s development and maintenance of internal knowledge resources. ethical and social responsibilities. health and safety policies. 4. Quarterly reports The Committee recommends that companies publish interim reports. Information of a non-financial nature is included in the annual report. The ability to recruit and retain competent employees is critical to NORDEN s continued growth. The annual report therefore addresses such issues as recruitment, remuneration policy and knowledge resources. The annual report also describes the efforts within CSR, including climate and environmental initiatives. NORDEN publishes interim reports in Danish and English. D/S NORDEN: Corporate Governance December 2009 5

4. The tasks and responsibilities of the Board of Directors (1) 1. The overall tasks and responsibilities of the Board of Directors - at least once a year - discuss and establish its most important tasks related to the overall strategic management as well as the financial and managerial supervision of the company and regularly evaluate the Management s work. Comment: The Board of Directors most important tasks normally include: Establishing the overall goals and strategies and being responsible for follow-up in this respect. Ensuring clear guidelines for responsibility, distribution of responsibilities, planning and follow-up as well as risk management. Appointing a qualified Management, establishing conditions of employment for the members of the Management, including preparing guidelines for its appointment and composition, as well as ensuring that the remuneration of the members of the Management reflects their performance. Ensuring that relations with the company s stakeholders are good and constructive. 2. The tasks of the chairman The Committee recommends that the company prepare a work and task description specifying the tasks, duties and responsibilities of the chairman and of the vice chairman, if required. The Board of Directors discusses its role as well as its managerial and supervision tasks on a regular basis. The Board of Directors has established its most important tasks in relation to strategy, goal, risk management and procedures, daily management and remuneration of the Board of Management. As part of this discussion, the Board of Directors conducts a systematic self-evaluation on an annual basis. A description of the Chairman s duties and responsibilities is included in the procedures of the Board of Directors. The Committee recommends that the chairman ensure that the special knowledge and competence of each individual member of the Board of Directors are used in the best possible manner in the Board s work to the benefit of the company. The Committee recommends that the company appoint a vice chairman who must be able to act in the chairman s absence and also to act as an effective sounding board for the chairman. The Chairman ensures that the special knowledge and competence of each board member are used in the best possible way and that the Board of Directors functions optimally. The Board of Directors has a Vice Chairman. Comment: The chairman is particularly responsible for ensuring that the Board of Directors functions satisfactorily and that the tasks of the Board are handled in the best possible way. A way of achieving this is that the chairman aims to ensure that the Board s negotiations take place when all members of the Board are present, that all essential decisions are made when all the members are present and that the Board s meeting frequency is planned in such a way as to allow it to act as a sounding board for the members of the Management and to respond quickly and effectively at any time. D/S NORDEN: Corporate Governance December 2009 6

4. The tasks and responsibilities of the Board of Directors (2) 3. Procedures The Committee recommends that the procedures always match the needs of the individual company and that all the members of the Board of Directors review the procedures at least once a year for this purpose. The Board of Directors reviews its procedures on a regular basis. Comment: It is essential that the procedures of the Board be an effective and functional tool for performing the Board s tasks. 4. Information from the Management to the Board of Directors establish procedures for how the Management reports to the Board and for any other communication between the Board and the Management with a view to ensuring that such information about the company's business as required by the Board is regularly provided to the Board. Procedures for how the Board of Management reports to the Board of Directors have been established. The Board of Directors receives a monthly report presenting the current status within a number of areas, and the Board of Directors is also kept informed on occasions that require this. Comment: In all circumstances, the Management must ensure that the Board is provided with essential information, whether the Board has requested such information or not. D/S NORDEN: Corporate Governance December 2009 7

5. The composition of the Board of Directors (1) 1. Composition of the Board of Directors regularly assesses the competence it must have to best perform its tasks and, in light hereof, assesses the composition of the Board of Directors. The Board of Directors regularly assess and at least in connection with the annual self evaluation its competences, experiences and composition in relation to the Company s current and future challenges. As a way to achieve this, the Committee recommends that: when assessing its composition, the Board of Directors takes diversity into consideration in relation to gender, age, etc. the Board of Directors ensures a formal, thorough and transparent process for selection and nomination of candidates. the Board of Directors includes a description of the nominated candidates background, including information about other managerial positions and directorships held by the candidates in both Danish and foreign companies as well as demanding organisational tasks performed by the individual persons, in the notice convening the general meeting when the election of the members to the Board of Directors is on the agenda. the description provides information about the recruitment criteria established by the Board of Directors, including the requirements for professional qualifications, international experience, educational background etc., which represent essential qualities with regard to the Board of Directors, and that the shareholders of the company are given an opportunity to discuss the composition of the Board of Directors at the general meeting. every year, in the management s review, the Board of Directors accounts for its composition, including its diversity, and for any special competence possessed by the individual members. 2. Training and introduction for members of the Board of Directors The Committee recommends that new members joining the Board of Directors be given an introduction to the company and that the chairman, in collaboration with each individual board member, decide whether it is necessary to offer the member in question relevant supplementary training. NORDEN states in its annual report for the competences and experiences that are estimated to be especially required to have represented in the Board of Directors in the Company s current situation. The report does not contain a statement of each member s knowledge and competences as what is important is that the shareholders can evaluate the Board s combined qualifications and eligibility to manage its job. In relation to proposal for new election to the Board of Directors, an appendix is sent together with the notice to the annual general meeting which presents the candidates and their position of trust in Danish and foreign companies and organizations, current and earlier occupational experience, age, education, etc. Furthermore, the appendix motivates the proposal for new election e.g. by describing the candidate s competences and experiences which the Board of Directors has deemed especially relevant for the Company. This appendix is also presented at the annual general meeting. When possible, new candidates present themselves at the platform at the annual general meeting. For a description relating to the proposal for reelection of current members of the Board of Directors, the Company refers to the description in the annual report with a list of managerial and other positions of trust in Danish and foreign companies, age, background and current employment. Furthermore, the Chairman of the Board of Directors motivates the proposals for new election or reelection at the annual general meeting. New members joining the Board of Directors receive a thorough introduction to the Company of which the Chairman is responsible in collaboration with the Board of Management. D/S NORDEN: Corporate Governance December 2009 8

5. The composition of the Board of Directors (2) The Committee recommends that every year, the Board of Directors assess whether the competence and expertise of the members need to be updated in some respect. Comment: Such training and updating of the members competence and expertise must be adjusted to the needs of the individual board member and must ensure that each of the members of the Board is capable of: taking part in a qualified dialogue with the Management about the company s strategic development and prospects. acquiring and keeping an overview of the company s core areas, activities and the conditions of the industry in question. actively participating in the Board s work. In addition, the members of the Board are solely responsible for actively obtaining knowledge and regularly keeping themselves posted on the conditions of the company and the industry in question. 3. The number of members of the Board of Directors The Commission recommends that the Board of Directors have only so many members as to allow a constructive debate and an effective decision-making process that enables all the members of the Board to play an active role and so that the size of the Board allows the competence and experience of the board members to match the requirements of the company. The Commission recommends that at regular intervals, the Board of Directors consider whether the number of board members is appropriate in relation to the requirements of the company. 4. The independence of the Board of Directors In order for the board members to act independently of special interests, the Committee recommends that at least half of the board members elected by the general meeting be independent persons. In this context, an independent board member elected by the general meeting may not: be an employee of the company or have been employed by the company within the past five years. be or have been a member of the Management of the company. be a professional consultant to the company or be employed by, or have a financial interest in, a company which is a professional consultant to the company. have some other essential strategic interest in the company other than that of a shareholder. The Board of Directors undertakes annual selfevaluation of the its work as well as the members competence and expertise. In addition, the Board s role, tasks and qualifications to handle its managerial and supervision tasks are discussed on a regular basis. NORDEN assesses that by virtue of its long experience, its network and its special competences within shipping, finance and strategic management the Board of Directors is fully qualified to manage NORDEN. According to NORDEN s Articles of Association the number of board members elected by the annual general meeting is between 4 and 6. This number has been deemed appropriate to ensure a constructive debate and an effective decision-making process. Furthermore, 3 members of the Board of Directors are elected by the employees at NORDEN. No board member elected by the annual general meeting is or has been employed by NORDEN. is or has been a member of the Board Management of NORDEN. is or has been a professional consultant to NORDEN or is associated with a company which is a professional consultant to the Company. has any strategic interest in NORDEN beyond that of a shareholder. Thus, the board members elected by the annual general meeting are considered to be independent based on the definition above. A few members elected at the annual general meeting are, however, associated with major shareholders in NORDEN. D/S NORDEN: Corporate Governance December 2009 9

5. The composition of the Board of Directors (3) Furthermore, any person related, in terms of business or in any other way, to the company's major shareholder, is not regarded as an independent person. Family ties with persons not regarded as independent persons also imply a situation of non-independence. The Committee recommends that at least once a year, the Board of Directors list the names of the members of the Board who are not regarded as independent persons and also disclose whether new candidates for the Board are considered independent persons and state the grounds for such consideration. NORDEN considers it of great importance that the Board of Directors as a whole has significant experience in managing the Company. This experience is an important asset in managing a growing and ever more complex business. Disclosure of which board member are associated with major shareholders (see above) can be found in the annual report. The members of the Board of Management are not part of the Board of Directors. The Committee recommends that the members of the Management of a company not be members of the Board of Directors of the same company. The Committee recommends that the annual report contain the following information about board members: occupation of the individual board member. other managerial positions or directorships held by the board member in Danish and foreign companies as well as demanding organisational tasks performed by that individual. number of shares, options and warrants held by the board members in the company and group enterprises as well as changes in the member s portfolio of the mentioned securities having taken place during the financial year. 5. Members of the Board of Directors elected by the staff The Committee recommends that the individual company consider the need to explain the system of staff-elected board members in the company's annual report or on its website. Comment: Board members elected by the staff have the same rights, duties and responsibilities as board members elected by the general meeting. 6. Meeting frequency meet at regular intervals according to a predetermined meeting and work schedule or when meetings are deemed necessary or appropriate as required by the company and that the annual meeting frequency is published in the annual report. The annual report contains information on the board members position, positions of trust in Danish and foreign companies and organizations, number of shares in NORDEN (as well as any changes in this share portfolio during the financial year). The Board of Directors does not receive any share options. NORDEN has described the system of staff-elected board members in brief on its website. The Board of Directors decides on an annual work calendar so that all relevant issues are treated during the year. The meeting frequency and the most essential activities are published in the annual report. In 2008, the Board of Directors held 7 ordinary meetings, including 2 strategy meetings. Besides this, the Board of Directors held 7 extraordinary meetings and telephone meetings. The meeting frequency rose in the second half of 2008 due to the financial crisis. D/S NORDEN: Corporate Governance December 2009 10

5. The composition of the Board of Directors (4) 7. Time allocated to Board work and the number of directorships NORDEN does not impose such a ceiling as The Committee recommends that a board member who is recommended. NORDEN believes that the decisive factor also a member of the Management of an active company ought to be each board member s capacity, competences hold not more than three ordinary directorships or one and contribution. chairmanship and one ordinary directorship in companies not forming part of the group unless in exceptional circumstances. Comment: It is essential that the individual member of the Board of Directors in advance understand the demands in terms of time placed on him by the board work and that he allocate sufficient time for such tasks while sitting on the Board. 8. Retirement age The Committee recommends that the company agrees on a retirement age for members of the Board of Directors and that the annual report contains information about the age of the individual members of the board. 9. Election period The Committee recommends that members of the Board of Directors be up for re-election every year at the general meeting and that the Board in this connection make special efforts to ensure the balance between replacement and continuity on the Board as regards the chairmanship and the vice chairmanship. The retirement age is 72. The annual report states the birth year of every board member. 2 of the board members elected by the annual general meeting are up for re-election every year. NORDEN considers it of great importance that this model ensures the necessary continuity. The Committee recommends that the annual report state when the individual member of the board joined the Board, whether the member of the board was re-elected and when the new election period expires. In the annual report, it is stated when each board member joined the Board of Directors and when his/her term will expire. Comment: If a board member s conditions of employment change during an election period, he must inform the other members of the board accordingly and be prepared to put his seat up for election at the next general meeting. 10. Use of Board committees consider and decide whether to establish committees, including nomination, remuneration and audit committees. If the Board appoints a committee, the Committee recommends that such appointment take place only in connection with matters relating to specific issues for the purpose of preparing decisions to be made by all the members of the board. In the event of appointment of a board committee, the Committee recommends the Board of Directors draw up terms of reference for that committee setting out its responsibilities and powers. The Board of Directors has appointed a remuneration and an audit committee. The remuneration committee establishes the frameworks for NORDEN s pay and bonus schemes. The audit committee focuses on risk management, accounting and reporting in NORDEN. It is disclosed in the annual report who constitute the members of the committees and the activities undertaken by the committees including the meeting frequency is accounted for in the annual report and at the annual general meeting. The terms of reference for both committees can be found on the company s website. It is being considered whether to establish further board committees on an ongoing basis. D/S NORDEN: Corporate Governance December 2009 11

5. The composition of the Board of Directors (5) The Committee recommends that the company's annual report describe important issues included in the terms of reference of the individual board committee and that the annual report list the names of the members of the individual board committee as well as the number of meetings of that committee held during the financial year. Comment: The specific conditions of each individual company, including the size and modus operandi of the Board of Directors as well as the size and complexity of the company, determine whether to establish a board committee. It is essential that the Board ensure that the appointment of a board committee does not cause important information intended for all members of the Board to be communicated to the board committee only. 11. Assessment of the Board s work establish an assessment procedure that regularly and systematically evaluates the work, results and composition of the Board as well as the work and results of the individual members, including the chairman, for the purpose of improving the Board's work and that the criteria of assessment are clearly defined. The Committee recommends that such assessment be made once a year, that the chairman of the Board be in charge of this process, drawing on external support, if necessary, that the outcome be discussed by the entire Board and that the Board provide details of its procedures of self-assessment in the company's annual report. assess the Management's work and results once a year according to previously established explicit criteria. The Committee recommends that the Management and the Board of Directors establish a procedure to assess the collaboration between the two at an annual meeting between the CEO and the chairman of the Board, and that the outcome of such assessment be presented to the entire Board. Comment: Assessing the Board as a whole implies a clear need to evaluate the extent to which previously established strategic goals and plans have been met. The annual report contains this information. The Board of Management's work and performance are assessed on a regular basis and always in connection with the annual negotiation of the Board of Management's pay and bonus conditions. The collaboration between the Board of Management and the Board of Directors is assessed as part of the Board of Directors self-assessment procedure and is discussed by the Board of Management and the Board of Directors as well as in meetings between the CEO and the Chairman. D/S NORDEN: Corporate Governance December 2009 12

6. Remuneration of the members of the Board of Directors and the Management (1) 1. Remuneration The Committee recommends that the total remuneration (fixed pay, incentive pay covering all forms of variable pay, pension, severance pay and other benefits) be at a competitive and fair level, reflecting the independent performance and value creation in the company of the members of the Management and the Board of Directors. 2. Remuneration policy adopt a remuneration policy and that the company disclose the contents of such policy in its annual report and on the company s website The Committee recommends that the remuneration policy reflect the interests of the company and the shareholders, match the specific conditions of the company and be reasonable in relation to the tasks and responsibilities undertaken and that it promotes long-term behaviour and is transparent and easy to understand. NORDEN assesses that the total remuneration of the Board of Management is at a competitive level, and it reflects the Board of Management's performance. NORDEN also assesses that the remuneration of the Board of Directors is at a competitive level, but that the Board of Directors only to a reduced degree gets a share of the values created in the company. In 2008, the annual general meeting adopted the Board of Directors proposal for a remuneration policy stating the principal lines for the remuneration of the Board of Directors, the Board of Management and NORDEN s employees. The remuneration policy is described on the Company s website. The implementation of the principal lines of the remuneration policy is described in the annual report and in the Chairman s statement at the general meeting. The remuneration of the Board of Directors is also presented for approval at the general meeting. The Committee recommends that the remuneration policy include a statement explaining the fixed pay and the overall principles of the incentive pay programme (covering all forms of variable pay), including the terms of the vesting/granting of bonus/performance-related bonus and/or price-related incentive schemes, etc., as well as pension schemes and severance programmes and other benefits. Information about the relationship between the fixed pay, the incentive pay and the other elements of the pay is a part of the remuneration policy. The Committee recommends that any defined benefits schemes be disclosed. The Committee recommends that the company's remuneration, including incentive pay, policy reporting include a statement explaining how such policy was implemented in the past financial year, how such policy is implemented in the current financial year and how the company plans to implement it in the next financial year. The Committee recommends that the remuneration policy contain clear and comprehensible information that is easy to understand by the individual shareholder and which enables the shareholder to see that the Board of Directors complies with the remuneration policy and the guidelines adopted for incentive pay. Thus, there must be a connection between the information communicated to and approved by the general meeting prior to the granting and the annual report stating the facts after the granting. NORDEN s remuneration policy meets the recommendations stated under section 2 of the recommendations. NORDEN does not have any defined benefit schemes. The remuneration policy adheres to the outlined recommendation. The remuneration policy adheres to the outlined recommendation. D/S NORDEN: Corporate Governance December 2009 13

6. Remuneration of the members of the Board of Directors and the Management (2) The Committee recommends the company's remuneration policy be mentioned in the statement given by the chairman at the company's general meeting and that the remuneration of the Board of Directors for the current financial year be presented for adoption at the general meeting when the annual report for the previous year is submitted for adoption. 3. General guidelines for incentive pay The Committee recommends that the general guidelines for incentive pay reflect the interests of the shareholders and the company, match the specific conditions of the company and be reasonable in relation to the tasks and responsibilities undertaken. There must be a connection between the information communicated to and approved by the general meeting prior to the granting and the annual report showing the specific results of the approved guidelines for incentive pay. The remuneration policy adheres to the outlined recommendation. The remuneration policy reflects the recommended elements. The ongoing implementation of the policy is described in the annual report and at the general meeting. The Committee recommends that the remuneration of the members of the Board of Directors not consists of share option schemes, but e.g. bonus schemes and shares at market price. If the remuneration of the members of the Management consists of share or subscription options, the Committee recommends that the schemes be set up as roll-over schemes (i.e. the options are granted periodically e.g. every year and expire over a number of years) and that the redemption price be higher that the market price at the time of granting. The Committee recommends that incentive pay programmes be designed in such a way that they promote long-term behaviour and are transparent and easy to understand, even for outsiders, and that valuation at the time of granting be made according to generally accepted methods. Comment: Section 69b of the Danish Companies Act provides that the Board of Directors of the company must have specified general guidelines for incentive programmes for the company s Board of Directors or Management. The guidelines must be considered and approved by the company in general meeting. 4. Severance programmes The Committee recommends that information about the most important aspects of severance programmes be disclosed in the company s annual report. The Board of Directors remuneration does not consist of share option schemes. The schemes are assessed and granted annually and the redemption price is higher than the market price at the time of granting. Thus, the options will only be of value when the shareholders have received a return on their share investment. The schemes promote long-term behaviour and are easy to understand. Valuation of the granted options is made according to the Black-Scholes model. The Board of Management s severance schemes in special situations such as takeovers or mergers are described in the annual report. Information about the Board of Management s ordinary notice of termination is not disclosed, it is, however assessed not to deviate much from ordinary market practice. D/S NORDEN: Corporate Governance December 2009 14

6. Remuneration of the members of the Board of Directors and the Management (3) Comment: Severance programmes cover a wide area, including number of years notice and qualification, change of control agreements, golden parachutes, insurance and pension schemes, payment of pension contributions after retirement, etc. Pursuant to section 107a of the Danish Financial Statements Act a company s annual report shall include information on special retirement agreements resulting from a successfully completed takeover bid. If, in exceptional cases, severance programmes include an element of incentive pay, such programmes shall be covered by section 3. 5. Openness about remuneration The Committee recommends that the annual report include information about the amounts of total remuneration of the individual members of the Board of Directors and the Management provided by the company or other companies within the same group. Comment: The annual report should contain all, clear and comprehensible information about the remuneration of the individual members of the management body that is easy to understand by the individual shareholder and which enables the shareholder to follow up on the compliance with the remuneration policy and the general guidelines adopted for incentive pay. In the annual report, NORDEN announces the proposed total remuneration of the Board of Directors and the total remuneration of the Board of Management, including share-related pay, bonuses and severance terms in special situations. The Board of Management has no other significant advantages, nor any pension plans. NORDEN does not publish remuneration to specific members of the Board of Directors or the Board of Management since NORDEN believes that what is important is that the shareholders can evaluate the total remuneration and development herein. D/S NORDEN: Corporate Governance December 2009 15

7. Risk management 1. Identification of risks The Committee recommends that, when formulating the company's strategy and overall goals, the Board of Directors and the Management identify the greatest business risks involved in achieving such strategy and goals. 2. Plan for risk management The Committee recommends that the Management prepare a plan for the company's risk management on the basis of the risks identified and submit this plan to the Board of Directors for approval, and that the Management regularly report to the Board to allow the latter to systematically follow the trends in significant risk areas. The shipping business is cyclical. Identification of the greatest risks and sensitivity analyses are therefore an integral part of the strategy formulation and the presentation of all important decisions to the Board of Directors. NORDEN has a number of plans and procedures in order to manage commercial and financial risks as well as insurance conditions, security, etc. These plans and procedures are presented to and approved by the Board of Directors. The Board of Management reports on a regular basis to the Board of Directors on the development within the specific areas. Comment: Such reporting may include procedures and action plans to eliminate, reduce, divide or accept these risks. 3. Openness regarding risk management The Committee recommends that the company's annual report include information about the company's risk management activities. Risk management is described in detail in the annual report. D/S NORDEN: Corporate Governance December 2009 16

8. Audit 1. The Board s nomination of an auditor candidate The Committee recommends that having consulted the Management, the Board of Directors make a specific and critical assessment of the auditor's independence and competence, etc., to be used in connection with the nomination of a candidate at the general meeting. 2. Agreement with the auditor The Committee recommends that the auditor agreement and the auditor's fee be agreed between the company's Board of Directors and the auditor. 3. Non-audit services The Committee recommends that every year, the Board of Directors lay down the overall, general scope of the auditor's provision of non-audit services with a view to ensuring the auditor's independence, etc. 4. Internal control systems The Committee recommends that at least once a year, the Board of Directors review and assess the internal control systems within the company as well as the management's guidelines for and supervision of such systems and that the Board consider the extent to which this function is able to assist the Board in this work. 5. Accounting policies and accounting estimates When the Board of Directors reviews the annual report (or a draft of it) together with the auditor, the Committee recommends that particular efforts be made to discuss the accounting policies applied in the most important areas as well as important accounting estimates and that the expediency of the accounting policies applied be assessed. 6. Result of the audit The Committee recommends that the result of the audit be discussed at meetings with the Board of Directors for the purpose of reviewing the auditor's observations and opinion, possibly on the basis of the long-form audit report. 7. Audit committee In companies with complex accounting and audit conditions, the Committee recommends that the Board of Directors consider establishing an audit committee to assist the Board in accounting and audit matters. According to routine, the assessment is made prior to the annual general meeting. The auditor agreement and the auditor s fee are agreed between the Board of Directors and the auditor. The Board of Directors does not lay down the frameworks for e.g. tax consultancy. This has not been relevant, as the consultancy happens within NORDEN's business practice and strategy. Once a year, the auditor reviews all NORDEN's control systems and important procedures. The auditor s report on this is reviewed and discussed by the Board of Directors. An internal audit has not been found necessary. The Board of Directors discusses the accounting policies and important accounting estimates on the basis of the external auditor s review of the annual report. The auditor reviews the annual report, the long-form audit report as well as other observations for the Board of Directors, which discusses these issues based on this review. An audit committee has been established consisting of the entire Board of Directors. D/S NORDEN: Corporate Governance December 2009 17