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Company Governance Report 2015

A word from the Chairman

The corporate governance report is the Board’s report where we describe for shareholders how we govern Odd Molly and how we actively work with internal control of financial reporting. Odd Molly has grown substantially in recent years. Significant growth requires greater control, stricter governance and expanded areas of responsibility. It also places higher demands on our Management and Board. These are the challenges we at Odd Molly face going forward.

Corporate governance involves more than structure and clarity. It is also about openness toward our shareholders. We want to show off our structures and give all of our shareholders an opportunity to see how we plan to drive Odd Molly forward.

We on the Board of Directors regard an active approach to governance and internal control at Odd Molly as a competitive advantage. We operate in competitive markets, where every business-critical element must be continuously reassessed to give free rein to our true passion, creativity. Good governance and control provide an essential support for the creative process at Odd Molly.

Patrik Tillman, Chairman of the board of Odd Molly


Corporate governance
Annual General Meeting
The shareholders exercise their decision-making authority at the Annual General Meeting (AGM), the company’s highest decision-making body. Shareholders who are recorded in the share register and have notified the company have the right to attend the AGM and to vote their shares. Shareholders who are unable to be present in person may be represent- ed by proxy.
Among the matters required to be dealt with at the AGM are the adoption of the consolidated balance sheet and income statement, the appropriation of the company’s profit or loss, the remuneration principles for senior executives and the discharge of the Directors and CEO from liability. Based on a proposal from the Nomination Committee, the AGM elects the Directors until the conclusion of the next AGM.

Amendments to the Article of Association
Odd Molly’s Articles of Association do not contain any provisions on amending the articles. Such changes are resolved in accordance with Swedish law, i.e., by the Annual General Meeting.

Annual General Meeting 2016
Odd Molly’s Annual General Meeting for the financial year 2015 will be held at 2 PM (CET) on April 19, 2016 in the company’s showroom at Karlavägen 73 in Stockholm. Information on the time and location, how to notify the company to attend and how shareholders can have an issue brought before the meeting is available on the company’s website, www.oddmolly.com, and page 68 in the full Swedish report.

Nomination Committee
The 2009 AGM resolved that the company should have a Nomination Committee. The Nomination Committee for the AGM on April 19, 2016 is comprised of Tom Wikström (Chairman), Christer Andersson and Rutger Arnhult. Prior to the AGM, the Nomination Committee held two meetings at which minutes were kept. No remuneration was paid for participation on the Nomination Committee. Tom Wikström is consid- ered independent in relation to the company, management and major shareholders. Christer Andersson and Rutger Arnhult are considered independent in relation to the company and management, but not the major shareholders.

Board of Directors
Odd Molly’s Board of Directors consists of six members elected by the AGM and no deputies. The Board of Directors is comprised of Patrik Tillman, (Chairman), Mia Arnhult, Lennart Björk, Kia Orback Pettersson, Elin Ryer and Nils Vinberg. None of the Directors are employed or have an employment-like relationship with the Group or any subsidiary.
Mia Arnhult and Patrik Tillman are considered independent in relation to the company and management, but not the major shareholders.
Lennart Björk, Kia Orback Pettersson, Elin Ryer and Nils Vinberg are considered independent in relation to the company, management and major shareholders. For a more detailed presentation of Odd Molly’s Board of Directors, see pages 62 – 63 in the full Swedish report.
Prior to the 2016 AGM the Nomination Committee proposed the re-election of Board members Mia Arnhult, Lennart Björk, Kia Orback Pettersson, Elin Ryer and Nils Vinberg, as well as the re-election of Patrik Tillman as Chairman of the Board.

Board remuneration
The Chairman of the Board and other Directors received total remuner- ation of SEK 800 thousand (650) for 2015, in accordance with the res- olution of the AGM. The Chairman receives SEK 175 thousand per year and the other five Directors each receive SEK 125 thousand per year.

Board work
The duty of the Board of Directors is to manage the company’s affairs on behalf of the shareholders. The Board’s work is governed by the Companies Act, the Articles of Association and the current rules of pro- cedure, including the instruction on the delegation between the Board and the CEO.
In 2015 the Board held nine meetings at which minutes were kept. During these meetings the Board discussed the financial results, balance sheet total, interim reports and annual report, as well as market and risk analyses, the direction of the business, organizational issues, strategy, the business plan and branding.

Appointment and dismissal of Board members
According to Odd Molly’s Articles of Association, the Board of Directors shall consist of three to ten members, who are elected annually by AGM for a term ending at the conclusion of the next AGM. Odd Molly’s Articles of Association do not contain any provisions on the dismissal of Board members. The Board of Directors currently consists of six mem- bers. None of the Board members are employed by the Group.

Number of meetings attended

2015 2014 2013 2012
Christer Andersson 2 10 8 12
Mia Arnhult 9 10 10 11
Lennart Björk 8 9 8 5
Kia Orback Pettersson* 8 9 5 -
Patrik Tillman 9 10 10 10
Nils Vinberg 8 10 9 12
Total number of meetings 9 10 10 12

Audit Committee
The Board of Directors has appointed an Audit Committee from among its members to prepare the Board’s quality assurance of the financial reporting. The Audit Committee consists of Directors Mia Arnhult, (Chair- man), Kia Orback Pettersson and Nils Vinberg. During the year the Audit Committee held two meetings at which minutes were kept, which the company’s CFO and auditor also attended.

Remuneration Committee
The Board of Directors has appointed a Remuneration Committee from among its members whose duty, within the framework of the remunera- tion guidelines for senior executives resolved by the AGM, is to prepare remuneration issues pertaining to the CEO and other senior executives. The Remuneration Committee consists of Directors Patrik Tillman (Chairman), Mia Arnhult and Elin Ryer. During the year the Remuneration Committee held two meetings at which minutes were kept.

Auditors
The auditors are elected by the shareholders at the AGM. The auditors review the company’s annual report, consolidated financial statements and accounting records, as well as the day-to-day administration of the Board and the CEO. Ernst & Young was elected as the company’s auditor at the 2007 AGM and reelected at the 2015 AGM for another year. The chief auditor is Jonas Svensson. The external audit is conduct- ed according to generally accepted accounting principles in Sweden.
The auditors have submitted verbal and written reports to the Audit Committee and the Board of Directors on their audit and review of the internal control.

Auditors’ remuneration
For 2015 the auditors’ remuneration amounted to SEK 544 thousand as regards the Parent Company, of which SEK 407 thousand related to audit work. The corresponding amounts for the Group were SEK 707 thousand and SEK 407 thousand, respectively.

Chief Executive Officer (CEO) and Group Management
The CEO manages the Group and its operations within the framework resolved by the Board. The CEO is responsible for keeping the Board of Directors informed of the company’s development, reporting on significant deviations from established business plans and events that significantly impact the company’s operations, and preparing the necessary background information for the Board of Directors, e.g., regarding the company’s expansion, investments and other strategically important issues.
Group Management, which is led by the CEO, consists of the managers of key operating areas within Odd Molly. Group Manage- ment holds monthly meetings where operational issues are discussed. Moreover, Group Management annually formulates a business plan that is adopted by the Board. Daily contact between the members of Group Management is critical to effective governance and management.
On December 31, 2015 Group Management consisted of Anna Attemark (CEO), Jennie Högstedt Björk, Kent-Jonas Lundqvist and Kristin Roos. During the year the company’s CFO stepped down. At the time the annual report was published the position was held by an Acting CFO. For a detailed presentation of Group Management, see pages 64 – 65 in the full Swedish report.
The Chairman conducts an annual performance review of the CEO in accordance with the CEO’s instructions.

Remuneration to the CEO and senior executives
The CEO’s base salary for 2015 was SEK 2,160 thousand (2,160).
The CEO is entitled to a monthly pension provision corresponding to 30 percent of base salary. Pension expenses amounted to SEK 648 thousand (684) in 2015. The terms of the CEO’s remuneration package are resolved by the Board. The company and the CEO have agreed to a term of notice of 12 months if she is terminated from the Board. The company and the CEO have agreed to a term of notice of 12 months if she is terminated by the company and 6 months is she resigns.
Senior executives refer to three persons, who together with the CEO formed the Group Management in 2015. The number of senior executives changed during the year. The total compensation figure includes the then CFO, who stepped down at the end of the year. The base salaries paid to senior executives, excluding the CEO, amounted to SEK 4,766 thousand (4,600) in 2015. Odd Molly pays premiums to a defined-contribution pension plan corresponding to 16-23 percent of the total payroll expense. Pension expenses amounted to SEK 903 thousand (945) in 2015. Senior executives have a term of notice of 3 – 6 months.
Remuneration to the CEO and other senior executives has been paid exclusively by the Parent Company. Variable remuneration in the form of a bonus has been expensed for CEO Anna Attemark and Vice President Jennie Högstedt Björk in the total amount of SEK 1,522 thousand.

Incentive programs
As of year-end Odd Molly had one outstanding incentive program proposed by Odd Molly’s Board of Directors based on warrants in Odd Molly Sverige AB. The warrant program, which was resolved by the Annual General Meeting 2014, issued 100,000 warrants to the wholly owned subsidiary Odd Molly Sverige AB for transfer to certain senior executives.
An incentive program for the CEO and Vice President expired during the year, after which the Board proposed a new program. An Extraor- dinary General Meeting held on February 24, 2016, after the end of
the financial year, voted in accordance with the Board’s proposal for an incentive program based on warrants in Odd Molly Sverige AB. The program issued 300,000 warrants to Odd Molly Sverige for transfer to the CEO and Vice President.

Internal control
The Board of Directors is responsible for corporate governance and internal control. The overarching purpose is to protect the company’s assets and the shareholders’ investment. The Board is also responsi- ble for ensuring that financial reporting is prepared in accordance with current laws. By reviewing all critical accounting issues and the financial reports issued by the company, the Board is able to assure the quality of Odd Molly’s financial reporting. This requires the Board to treat issues of internal control, compliance, material uncertainties in reported values, any uncorrected inaccuracies, events after the balance sheet date, changes in estimates and assumptions, any verified irregularities and other conditions that affect the quality of the financial reports.

Control environment
An important part of the internal control is to formulate and establish a number of fundamental policies, guidelines and frameworks for the com- pany’s financial routines and financial reporting. The company’s finance policy was established in 2013 and is adopted annually by the Board.
The financial handbook, which is updated continuously, is an important tool to assure good internal control over the company’s operations.
Operations are monitored and governing documents are revised contin- uously and communicated to all affected employees. The Board continu- ously evaluates operations and results through a reporting packet that contains an income statement, balance sheet and key financial ratios as well as other material operational and financial information.

Risk assessments
Odd Molly works continuously and actively with risk analysis, risk assessment and risk management to ensure that the risks the company is exposed to are managed efficiently within the established framework. The risk assessment includes, among other things, the company’s administrative routines for invoicing and order processing. Balance sheet and income statement items with a risk of material error are also reviewed continuously. Odd Molly uses prepayments when its credit analysis has a negative outcome or for new, smaller customers, as well as with active control of currency risks.

Control activities
Control structures are designed to manage the risks that the Board of Directors considers material to the internal control of financial reporting. These control structures consist of an organization with clearly defined lines of authority, routines and job descriptions. Control activities include reporting on decision-making processes and procedures for important decisions (e.g., new major customers, investments, inventories, con- tracts, etc.) as well as reviews of all financial reports that are presented.
The financial handbook covers, among other things, control activities such as reconciliations, authorizations, financial systems and bench- marks. Authorization instructions are updated continuously. The right to authorize payments is also treated in this instruction. Approval is required by at least two persons jointly from the finance department or by the CEO and the CFO.

Information and communications
The company’s governing documents in the form of policies, guidelines and manuals for internal and external communications are updated con- tinuously and communicated internally through the appropriate channels such as internal meetings and internal mail. The company’s communi- cation policy, which contains guidelines on how information is released, applies to communications with outside parties. The purpose of the policy is to ensure that Odd Molly accurately and thoroughly meets all its information obligations according to current laws and regulations.

Monitoring and oversight
The Board continuously monitors the effectiveness of the internal control based on the preparations by the Audit Committee. The Board makes certain that the company’s auditors review the financial report for the third quarter. Lastly, the Board issues a brief report on how internal con- trol was implemented during the year. To date the Board has not found reason to establish a separate internal audit unit, although it evaluates annually whether one is needed.

Odd Molly share and ownership structure
Information on Odd Molly’s share and ownership structure can be found in the section on Odd Molly’s share in the annual report on pages 22 – 23 and in the section on the Odd Molly share and ownership structure in the Board of Directors’ report.

The Board of Directors, March 23, 2016

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