9.1.2.4 Other recommendations

With respect to remuneration, the SCCG 2005 provides in rule 2.2.7 that board members may not participate in share-price incentive schemes, which are intended for management and other employees. However, the managing director may participate in these schemes, even if he is a member of the board. Incentive schemes for board members are not prohibited, but the general meeting should decide on the number of instruments issued and other terms.

Furthermore, the SCCG 2005 states in rule 3.2.6 that members of the board should be appointed for one year at a time. In the proposal of the Code Group, rule 3.2.7 requires the giving of reasons if a board member is proposed for re-election after eight years of service or at an age of over seventy. These additional requirements have been removed in the final version of the SCCG 2005 by the Code Group. Although it admits that such a rule makes it easier for the nomination committee to effect renewal, it has now included the following line in the exploratory text of chapter 3.2: ‘The renewal of the board should be paced with due consideration for the development of the company’s operations as well as for the need for continuity in the work of the board.’ This addition should move the nomination committee to strive for renewal and prevents it from singling out an individual director (Code Group 2004b: 37-38).

Companies should attach a corporate governance report to the annual report, stating whether the auditors have reviewed the report or not. In this report the company has to state that it is applying the SCCG 2005 and give an explanation if it is not. Chapter 5 of the SCCG 2005 provides all the rules regarding the publication of corporate governance issues.