Investor Relations
Corporate Governance
Metro International S.A. is a Luxembourg limited-liability company
2009 Corporate Governance Report
The Company
Metro International SA is a Luxembourg limited liability company (Societé Anonyme) listed on the Stockholm Stock Exchange. Corporate governance within Metro International S.A. is based on Luxembourg legislation, the listing requirements of the Stockholm Stock Exchange and the Swedish Code of Corporate Governance (the “Code”) which the Company applies. Metro applies the Code in accordance with the “comply or explain” principle meaning that deviations from the Code are permissible but must be explained. This report has not been audited by the Company’s external auditors.The Board’s responsibility and work during 2009
The Board of Directors is constituted in order to review and decide upon the Company’s strategic development, as well as to provide support to, and control and supervision over, the activities of the executive management of the Company. The Board is also authorised to issue new shares within the limits of the existing authorised capital of Metro International S.A. The Board of Directors has adopted working procedures for its internal activities that include rules pertaining to the number of Board of Directors meetings to be held, the matters to be handled at such regular meetings, and the duties of the Chairman. In order to carry out its work more effectively, the Board of Directors has appointed a Remuneration Committee and an Audit Committee. These committees handle business within their respective areas and present recommendations and reports on which the Board of Directors may base its decisions and actions. However, all members of the Board of Directors have the same responsibility for all decisions made, irrespective of whether the issue in question has been reviewed by a committee. The Board has also appointed a Finance Committee comprising of Mia Brunell Livfors, Nigel Cooper, Henry Guy, Erik Mitteregger, Per Mikael Jensen and Anders Kronborg. Throughout 2009 the Finance Committee met on a monthly basis in between Board and Audit Committee meetings, to monitor results, discuss potential investments and any other significant items which may have financial implications. The Board of Directors has also adopted procedures for instructions and mandates issued to the CEO and senior management. These procedures include the requirement that the Board of Directors approve all significant transactions including new edition launches, acquisitions and closures or disposal of businesses and significant capital expenditure programmes. In addition, the Board of Directors has also issued written instructions specifying when and how information, which is required in order to enable the Board of Directors to evaluate the Company and its subsidiaries’ financial position, should be reported to the Board of Directors. The Board of Directors convened for nineteen full meetings in 2009, of which six were face to face meetings and thirteen were telephone conference calls, in order to discuss and decide upon all current material operating issues, to review the latest financial results, to review investment proposals and to consider opportunities for the further development of the Company’s business. One of the face to face meetings was a two day session specifically focused on strategy.
Remuneration Committee
Cristina Stenbeck is Chairman of the Remuneration Committee and Mia Brunell Livfors and Didier Breton are members thereof. The Board of Directors commissions the work of the Remuneration Committee.The responsibilities of the Remuneration Committee include issues regarding salaries, pension plans, bonus programmes and other employment terms for the CEO and senior management. The Remuneration Committee also advises the Board of Directors on the development and implementation of long-term incentive plans.
Audit Committee
Nigel Cooper is Chairman of the Audit Committee and Henry Guy and Mario Queiroz are members thereof. The Board of Directors commissions the work of the Audit Committee. The Audit Committee is responsible for reviewing the Company’s internal controls, implementing and reviewing the Company’s internal audit processes, considering and advising on financial risks, determining the consistency of the company’s accounting policies and evaluating management’s estimates and assumptions in the preparation of the Company’s consolidated financial statements. The Audit Committee also maintains the working relationship with the Company’s internal and external auditors and ensures the qualification and independence of these, the Company’s adherence to prevailing rules and regulations and, where applicable, reviews transactions between the Company and related parties.
Remuneration of the Board
Remuneration of the Board is in accordance with decisions taken at the AnnualGeneral Meeting. The 2009 AGM decided that fees paid to the Boardshould comprise a sum of €294,500. The Chairman of the Board wasallocated €65,000 (whereof €32,500 in cash and €32,500 in shares) witheach other member allocated €32,500 (whereof €16,250 in cash and€16,250 in shares). In regards to the Audit Committee, €16,000 was allocatedto the Chairman and €4,500 to each of the other members. In regardsto the Remuneration Committee, €4,500 was allocated to the Chairmanand €2,500 to each of the other members. Theshare based compensation will take the form of fully paid-up sharesof Metro International S.A. common stock to be issued within MetroInternational S.A.’s authorised share capital to the members of theboard of directors. The shares shall be issued in equal number of Class A and Class B shares and will be subject to a one-year lock up period as of their respective date of issue.
Evaluation of the Board
The Chairman of the Board makes sure that an annual evaluation of the Board’s work is performed where the board members are given the opportunity to share their views on working methods, Board material, their own and other Board member’s work as well as the extent of their assignment. The evaluation of the Board elected at the 2009 AGM was carried out in December 2009 by using a written questionnaire that was presented to all Board members and facilitated by the Chairman of the Board.
External Auditors
Metro International S.A.’s external auditors are elected at the AGM of the Company for a period of one year. The current auditors, KPMG were reelected at the 2009 meeting. The next election of the external auditor will take place at the 2010 AGM. KPMG has been the Company’s external auditor since Metro International S.A.’s IPO in August 2000. Thierry Ravasio, Luxembourg, and Anders Malmeby, Stockholm, have been the lead audit partners since 2006. The external auditors report their findings to the shareholders by means of the Auditors’ report, which is presented to the relevant AGM. In addition, the Auditors’ report detailed findings at each of the ordinary meetings of the Audit Committee. The audit assignment has involved the examination of the Annual Report, a review of the interim report for the third quarter 2009, other tasks related to the duties of a company auditor and consultation or other services that may result from observations noted during such examination or implementation of other tasks.
Internal control
Control environment
Inorder to ensure efficient management of Metro International S.A.’s business risk, the Board has specified a set of instructions and plan of work regarding the roles and responsibilities of the CEO and the Board committees. The Board also has a number of established guidelines, which are central to its work on internal control activities. This includes monitoring performance against plans and prior years. The senior executive management team regularly reports to the Board according to established routines and in addition to the Audit Committee’s report. The senior management is however responsible for internal controls being in place to manage the risks of Metro International S.A.’s daily business operations. Guidelines for other employees are also distributed so that they may understand and appreciate the importance of their respective roles, and in order to maintain properly functioning internal controls.
Risk assessment
The Audit Committee is responsible for the overall programme for monitoring and managing significant financial risk and any material risks in financial reporting. Internal Audit is maintaining a ’risk register’ of all significant risks on behalf of the Board and management at both a group and subsidiary level. The risk register is used in order to facilitate the management of potential risks of significance and mitigating measures. The Board and the Audit Committee review the risk register at each meeting. In addition to this, Internal Audit carries out periodic risk assessments of the operations by assessing specific risks for each operation. The latter focus’ on specific financial risk elements for each operation and estimate’s the likelihood and materiality of the risks. An internal audit calendar is put in place by the Audit Committee at the beginning of each calendar year to ensure accurate and comprehensive evaluation of the internal controls of the entire Metro International S.A. organization.
Control activities
The Swedish Code of Corporate Governance requires that the Board ensures that the Company has a sound system of internal control and assesses how well it functions. In 2006 an Internal Control project was commenced. The Internal Control project planned its work in consultation withthe Audit Committee, Metro International S.A.’s management and Metro International S.A.’s external auditors. During 2008, the Internal Control project focused on systematically reviewing and documenting important risk areas to assess how control activities are designed and work, in order to detect and rectify weaknesses and deviations. This documentation of significant risks and the verification of individual control measures was performed at both a group and operational level. The work to update this documentation and verify significant control activities was continued throughout 2009.
Information and communication
Metro International S.A.’s organisation is decentralised, so that operational and editorial teams are close to the local markets. Metro International S.A.’s operating structure is designed to create the greatest possible transparency to facilitate monitoring and to promote the flow of information through the Group. For all subsidiaries and franchises there is an Executive Vice President who is accountable for internal control matters including accurate financial reporting. All operating units submit their financial results monthly, reported according to the Group’s IFRS accounting principles. The reports are consolidated and form the basis for quarterly reports and monthly operating reviews at everything from operating unit to Group level. The operating reviews conform to a long established annual business planning and budgeting process, and quarterly forecasts of financial results for the current calendar year structure in which sales, income, cash flow and other key figures and trends are combined and form the basis for analysis and actions by management at different levels. The operating units are compared and ranked each month in relation to other units in the Group. The ranking is in terms of the key performance measures for the Group. This benchmarking provides an effective tool for review and for spreading best practice across the Group. The financial reviews take the form both of regular monthly meetings at divisional level and of more informal analysis work.
Monitoring
Metro International S.A. has an internal audit function responsible for the evaluation of internal control activities and risk management. This work includes reviewing the application of established routines and guidelines. The internal audit function plans its work in co-operation with the Audit Committee and reports its reviews back to the Audit Committee. The Board of Directors regularly evaluates the information provided by Group management and the Audit Committee. The Audit Committee is responsible for arranging follow up audits on internal control activities. The work includes ensuring that measures are taken to deal with any inaccuracies and to implement control improvements emerging from external and internal audits.