Corporate Governance


GENERAL PRINCIPLES It is essential to the TANDBERG board of directors that all stakeholders have confidence in the Company based on strong governance practices. Those practices include treating all shareholders equally; having independent, competent people in the Company’s governing bodies; ensuring that all financial accounts are audited by qualified, independent auditors; and that information provided by the Company provides an accurate picture of the underlying situation on an ongoing basis.

Strong governance is in keeping with TANDBERG’s core values, which include speed and precision, enthusiasm and integrity, exceeding expectations, fun and profit, and TANDBERG First. Above all, TANDBERG expects and promotes a pervasive sense of integrity and the highest ethical behavior on the part of all employees.

TANDBERG’s principles provide the foundation for sustainable value creation, to the benefit of our shareholders, employees and other stakeholders. The board of directors is committed to protecting shareholder rights and interests by reducing risk and maximizing shareholder value. This includes benchmarking management responsibility with a transparent, open, and accountable mechanism.

TANDBERG is incorporated in Norway with a governance structure built on Norwegian corporate law. The Company is organized as a traditional limited company, with a board of directors, a chief executive officer, and an external auditor. The annual general meeting is where the board formally ratifies major decisions affecting the Company’s affairs.

ACTIVITIES TANDBERG’s mission is “to inspire people to communicate more effectively using our real-time visual communication solutions”. The Company’s objectives, to generate fun and profit through the development and sale of products and services related to visual communication, is anchored in the Company’s business activities clause in the articles of association §2: “The Company’s objectives are to generate profitability, satisfaction and value through the development, production and sale of products and services based on electronics and computer technology, and engagement in other similar business activities.”

In accordance with its objectives, TANDBERG works to maintain its position as a leading global provider of visual communication solutions by helping companies and organizations fill the visual communication gap that exists today, and by combining a strong corporate culture with high corporate social responsibility standards and strong financial results.

EQUITY AND DIVIDENDS To achieve its aggressive long-term growth targets, it is TANDBERG’s policy to maintain a high equity ratio; however, the Company has a business model that allows for strong cash flow generation. Consequently, TANDBERG’s needs for growth can be met while also maintaining a dividend distribution as long as the Company is reaching targeted growth levels. In view of the Company’s strong cash flow and cash position, the board of directors called an Extraordinary General Meeting on 10 November 2004 and obtained authorization for a share buyback program which opens for buyback of up to 10% of TANDBERG’s shares (13,428,460 shares) in the market, and which is valid until 10 May 2006. The intention is to use the shares in connection with incentive schemes for employees, acquisitions or to cancel the shares through a capital reduction. All transactions under this program will be disclosed to the Oslo Stock Exchange, and on www.tandberg.net.

Mandates granted to the board of directors to increase the Company’s share capital are restricted to defined purposes and are limited in time to no later than the date of the next Annual General Meeting. On 14 April 2005, the General Meeting adopted a resolution to grant the board of directors a mandate to increase the share capital by up to NOK 13,000,000 through the issue of up to 13,000,000 shares of nominal value NOK 1 with the authority to waive the preemption rights of existing shareholders and to determine the consideration for shares issued in terms other than cash. Where consideration does take the form of cash payment, the issue price is expected to be close to the then current market price. This authority is valid until the date of the next Annual General Meeting. Similar mandates have regularly been granted by previous General Meetings. The board of directors does not have any specific plans to exercise this authority.

Share-based incentive programs for employees must always be approved by means of a specific board mandate. The board of directors considers it desirable that employees be more closely connected with the company through an active interest as shareholders, and considers that such an ownership interest has represented and will represent an important contributory factor to the success of the company. On 15 April 2004, the General Meeting adopted a resolution to grant the board of directors a mandate to increase the share capital by up to NOK 3,500,000 by private placement of shares with employees of the TANDBERG Group. The mandate is valid for two years, until 15 April 2006, due to the nature of the program. The 2005 share option program was cancelled by the board of directors on 16 February 2006. Consequently, the board of directors will not exercise this authority.

EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSE ASSOCIATES TANDBERG has one class of shares and each share entitles the holder to one vote at the General Meetings.

The board of directors is of the opinion that the Company periodically could be confronted with situations where the Company can grow further by making use of rights issues to one or several strategic partners as well as through mergers and acquisitions with shares or cash if the Company quickly can get in position to effectuate the necessary liquidity and/or shares. In addition, situations could occur where the Company’s equity needs strengthening in order to ensure future conditions of operations. For the current mandate to increase the Company’s share capital, the pre-emption rights of existing shareholders are therefore waived.

Any transactions the Company carries out in its own shares take place in accordance with established practice and guidelines from the Oslo Stock Exchange.

Strict guidelines regarding transactions between the Company and shareholders, members of the board of directors, executive management and close associates of any such parties have prevented any unfortunate situations. If confronted with such situations, the Company will adhere to the principles laid down in the Norwegian Code of Practice for Corporate Governance.

The Company has an established and closely monitored insider trading policy.

FREELY NEGOTIABLE SHARES TANDBERG has no limitations on the transferability of shares and each share has equal rights.

GENERAL MEETINGS General Meetings are held in accordance with the Norwegian Code of Practice for Corporate Governance. Notice and supporting information are sent in English and Norwegian to shareholders well in advance of the meeting. Final deadline for shareholders to give notice of their intention to attend the meeting is one working day prior to the meeting. Shareholders who are unable to attend the meeting may vote by proxy. The Chairman, Vice-Chairman, Chairman of the Nomination Committee, CEO, CFO and the auditor are all required to be present at the meeting in person or via video. The Chairman for the meeting is generally independent. Notice, enclosure and protocol of meetings are available on TANDBERG’s web site.

NOMINATION COMMITTEE An independent nomination committee is responsible for proposing candidates for election to the board by shareholders at the General Meeting. The nomination committee, elected by the General Meeting, is a body established pursuant to the Articles of Association.

The committee is currently comprised of Halvor Løken (committee Chairman), Åge Korsvold and Jan Chr. Opsahl, of which are two independent of the board of directors and the executive management. A list of board nominees is given to shareholders with at least two weeks notice of voting. For further information about the members of the committee and deadlines for submitting proposals to the committee, please see TANDBERG’s web site.

COMPOSITION AND INDEPENDENCE OF THE BOARD OF DIRECTORS The board is elected for one year (employee representatives for two years). The board currently consists of six members, four (incl. Chairman and Vice-Chairman) elected by the shareholders at the Annual General Meeting and two elected by the employees. The board nominees should be committed to enhancing long-term shareholder value and must possess a high level of personal and professional ethics, sound business judgment and integrity. The board’s size and composition will continue to be open to discussion. Please see TANDBERG’s web site for a detailed description of the board members, including share ownership. TANDBERG does not have a Corporate Assembly.

The composition of the board of directors meets the requirements of the Norwegian Code of Practice for Corporate Governance, with all four shareholderelected members of the board independent of the Company’s executive management, material business contacts and main shareholders. Mechanisms, including the use of board committees, are in place to ensure independent preparation of matters for discussion by the board.

THE WORK OF THE BOARD OF DIRECTORS The conduct of the board of directors is following the adopted board instructions for TANDBERG asa. A specific meeting and activity plan is adopted towards the end of each year for the following period. The board meets eight times a year, twice for two-day meetings, but holds additional meetings under special circumstances. Its working methods are openly discussed. Between meetings, the Chairman and Chief Executive Officer update the board members on current matters. There is frequent contact regarding the progress and affairs of the Company. Each board meeting includes a briefing by one of the functional or department managers of the company followed by Q&A. It is a continuous center of attention for the board ensuring executive management maintains systems, procedures and a corporate culture that promote compliance with legal and regulatory requirements and the ethical conduct of the business. One two-day meeting is dedicated to product/market development and one two-day meeting is dedicated to strategy. The board annually evaluates its work, performance and expertise, and the report is made available for the Nomination Committee. In addition to the Nomination Committee, the board has established a permanent Compensation Committee and an Audit Committee, and will evaluate a further formalization of instructions, rules of procedure and routines for these committees according to the recommendations of the Norwegian Code of Practice for Corporate Governance.

REMUNERATION OF THE BOARD OF DIRECTORS Remuneration for board members is a fixed annual sum proposed by the nomination committee and approved at the Annual General Meeting. All remuneration to the board of directors is disclosed in Note 15 in the Annual Report. The remuneration is not linked to the Group’s performance and no share based incentives are given to the members of the board, except internal board members. It is TANDBERG’s policy that internal board members receive a fee in respect of the responsibility they assume by being a member of the board, but that no additional fees are paid in respect of the duties involved since these are considered to be covered by the salary paid to such internal board members.

REMUNERATION OF THE EXECUTIVE MANAGEMENT The Compensation Committee, comprised of Amund Skarholt and Patricia Auseth, is preparing guidelines for the remuneration of the executive management and preparing matters relating to other material employment issues. Details concerning remuneration of the executive management, including all details regarding the CEO’s remuneration, are given in the Annual Report, Note 15. The board assesses the CEO and his terms and conditions once a year. The General Meeting is informed about incentive programs for employees.

INFORMATION AND COMMUNICATIONS Communication with shareholders is a high priority. During the announcement of quarterly and annual financial results, there is opportunity for management to answer questions from the Company’s shareholders. The Company has adopted a policy of not giving quantitative guidance to the financial community. General market outlook and qualitative statements will be given. TANDBERG continually seeks ways to communicate more effectively with its shareholders. TANDBERG has qualified for the Oslo Stock Exchange Information Symbol and English Symbol, fulfilling the requirements regarding the scope and distribution of information in accordance with the guidelines.

The TANDBERG Web site (www.tandberg.net) provides shareholders with information about the Company including annual and quarterly reports, press releases, financial presentations, share price information, articles of association, protocols from general meetings, key contact information, financial calendar as well as other pertinent shareholder information.

TAKE-OVERS The board endorses the recommendation of the Norwegian Code of Practice for Corporate Governance, and TANDBERG has no active anti-takeover devices or “poison-pills”. The board will not seek to hinder or obstruct take-over bids for the Company’s activities or shares unless there are particular reasons for this.

AUDITOR The auditor participates in meetings of the board of directors that deal with the annual accounts, and upon special request. Every year, the auditor presents to the board a report outlining the audit activities in the previous fiscal year and highlights the areas that caused the most attention or discussions with management, as well as a review of the Company’s internal control procedures, including identified weaknesses and proposals for improvement. The auditor will make himself available upon request for meetings with the board at which no member of the executive management is present, as will the board upon auditor’s request. The auditor also participates in meetings of the board’s Audit Committee when requested. It is policy not to give substantial consultancy contracts to the Company’s auditor. The General Meeting is informed about the company’s use and remuneration of the auditor, and details are given in Note 3 in the Annual Report.

TANDBERG’s guidelines for Corporate Governance are in accordance with the Norwegian Code of Practice for Corporate Governance, dated 7 December 2004, as required for all listed companies on the Oslo Stock Exchange with effect from 2005. TANDBERG will update its guidelines and apply the new revised Code of Practice as published on 8 December 2005 from the 2006 financial year.