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Corporate Governance

Corporate Governance

Members of the Board of Icelandai r Group Finnur Ingólfsson, Chairman Ómar Benediktsson, Vice-chairman Hermann Guðmundsson Einar Sveinsson Jóhann Magnússon Marta Eiríksdóttir Helgi S. Guðmundsson Alternati ve Board MemberS Jón Benediktsson Guðsteinn Einarsson

Icelandair Group holds the view that well functioning corporate governance principles are essential for assuring shareholders and other stakeholders that the company is doing its best to ensure sound and effective control of the company’s affairs and a high level of business ethics. Exercising good corporate governance will, in the long run, build a solid company returning shareholders satisfactory profits on their investment. Corporate governance serves to ensure an open and transparent relationship between the company’s management, its Board of Directors, its shareholders and other stakeholders.

SHAREHOLDERS' MEETINGS

Shareholders exercise their powers at shareholders’ meetings, which represent the supreme authority in all the affairs of Icelandair Group within the limits provided for by the company’s Articles of Association and statutory law. All shareholders are permitted to attend shareholders’ meetings, express their views and exercise their voting rights. Shareholders may be represented by proxies, and they may be accompanied by advisors. The auditor of the company and the CEO also have full rights to speak and submit motions at shareholders’ meetings whether they are shareholders or not.

Notices of shareholders’ meetings must specify the business to be addressed at the meeting. If the agenda includes motions to amend the Articles of Association of the company, the substance of the motion must be included in the notice of the meeting. Seven days before a shareholders’ meeting, at the latest, an agenda, final submissions and, in the case of annual general meetings, the annual accounts, report of the Board of Directors and the auditor’s report must be laid open for inspection by shareholders at the company office.

Each shareholder is entitled to have a specific item of business included on the agenda of a shareholders’ meeting, provided that such shareholder submits a written request to this effect to the Board of Directors of the company with sufficient advance notice for the item to be included on the agenda in accordance with the company’s Articles of Association.

Items of business which are not included on the agenda may not be accepted for final decision at a shareholders’ meeting except with the consent of all the shareholders in the company, but a resolution may be passed to provide guidance to the Board of Directors of the company. Lawfully submitted motions for amendments may be put to a vote at the meeting itself, even if they have not been laid open for inspection by shareholders. An Annual General Meeting is always permitted to conclude matters which it is required to address pursuant to statutory law or the company’s Articles of Association.

RIGHTS, PREFERENCES AND RESTRICTIONS ON SHARES

All voting shares carry equal rights, and no privileges are attached to any shares in the company. All the shares are freely transferable except as otherwise provided by law.

ACTIONS NECESSARY TO CHANGE SHAREHOLDERS ’ RIGHTS

According to Article 23 of the company’s Articles of Association, the Articles may be amended only at a lawful Annual General Meeting or extraordinary shareholders’ meeting, provided that the notice of the meeting clearly indicates that such an amendment is proposed and outlines the main substance of the amendment. A decision to amend the Articles is valid only if it has the support of at least 2/3 of the cast votes and the support of shareholders controlling at least 2/3 of the share capital represented at the meeting, provided always that no other force of vote is required by the Articles or statutory law, as further provided in Article 93 of the Companies Act.

The Annual General Meeting shall be held before the end of May each year.

BOARD PRACTICES

The company’s Board of Directors exercises the supreme authority in the company’s affairs between shareholders’ meetings, and it is entrusted with the task of ensuring that the organisation and activities of the company‘s operation are at all times in correct and proper order.

The Board of Directors is instructed in the company’s Articles of Association to appoint a CEO for the company and decide the terms of his or her employment.

The Board of Directors and CEO are responsible for the management of the company.

The company’s Board of Directors must at all times ensure that there is adequate supervision of the company’s accounts and the disposal of its assets and shall adopt working procedures in compliance with the Companies Act. Only the Board of Directors may assign powers of procuration on behalf of the company. The signatures of the majority of the members of the Board are required to bind the company. The CEO has charge of the day-to-day operation of the company and is required in his work to observe the policy and instructions set out by the company’s Board of Directors. Day-to-day operation does not include measures which are unusual or extraordinary. Such measures can only be taken by the CEO with the specific authorisation of the Board of Directors, unless it is impossible to await the decision of the Board without seriously disadvantaging the operation of the company. In such instances, the CEO is required to consult with the Chairman of the Board, if possible, after which the Board of Directors must immediately be notified of the measures. The CEO shall ensure that the accounts and finances of the company conform to the law and accepted practices and that all assets belonging to the company are securely safeguarded. The CEO is required to provide the members of the Board of Directors and company auditors with any information pertaining to the operation of the company which they may request, as required by law.

The company’s Board of Directors consists of seven members and two alternate members, elected at the Annual General Meeting for a term of one year. Those who intend to stand for election to the Board of Directors must inform the Board in writing of their intention at least five days before the Annual General Meeting, or extraordinary shareholders’ meeting at which elections are scheduled. Only those who have informed the Board of their candidacy are eligible.

The Board of Directors elects a Chairman and Vice chairman from among its members, and otherwise allocates its obligations among its members as needed. The Chairman calls board meetings. A meeting must also be held if requested by a member of the Board of Directors or the CEO. Meetings of the Board are valid if attended by a majority of its members. However, important decisions shall not be taken unless all members of the Board have had an opportunity to discuss the matter, if possible. The outcome of issues is decided by force of vote, and in the event of an equality of votes, the issue is regarded as rejected. The CEO attends meetings of the Board of Directors, even if he or she is not a member of the Board, and has the right to participate in the discussion and submit proposals unless otherwise decided by the Board in individual cases. A book of minutes is kept of proceedings at meetings and must be signed by participants in the meeting. A Board member who disagrees with a decision made by the Board of Directors is entitled to have his or her dissenting opinion entered in the book of minutes. The same applies to the CEO.

AUDIT COMMITTEE

The main tasks of the Audit Committee include co-ordinating all auditing work within the Group in co-operation with the company’s internal auditors, and acting in an advisory capacity to the Board of Directors with respect to financial reporting. The Audit Committee is appointed by the company’s Board of Directors and is composed of three members. The current members of the Committee are three members of the Board of Directors: Ómar Benediktsson, Chairman, Jóhann Magnússon and Martha Eiríksdóttir.

WAGE TERMS COMMITTEE

The purpose of appointing a Wage Terms Committee was to avoid placing the company’s managers in control of their own remuneration and furthermore to ensure that the management’s remuneration is structured so as to serve the long-term interests of the shareholders. The main tasks of the Wage Terms Committee are policy making with respect to the management’s performancerelated bonuses, including stock options. The Committee conducts evaluations of management remuneration and monitors the management’s acquisition of stock in the company. The current members of the Committee are three members of the Board of Directors: Finnur Ingólfsson, Chairman, Hermann S. Guðmundsson and Helgi Sigurður Guðmundsson.

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