Corporate governance

The following provides information in relation to the relevant sections of the Norwegian Code of Practice for Corporate Governance (NCGB) dated 14.10.2021. Norsk Tipping is not a listed company, and this means that not all parts of NUES’ Code of Practice are relevant.

The corporate governance report, together with the instructions for the Board and the instructions for the CEO, clarifies the division of responsibilities between the owner, Board and senior management team.

In accordance with the Ministry’s corporate governance guidelines, the role of the owner must be exercised in compliance with the Norwegian state’s principles for good ownership. Chapter 4 of the guidelines contains common regulations and requirements for the Ministry’s governance, control and safeguarding of cross-sectoral considerations (social responsibility) that apply to limited companies in which the Ministry has ownership interests. Chapter 4 sets out special factors that must be taken into account in the Ministry’s governance and control of an individual company or group of companies based on their sectoral policy objectives. In the case of Norsk Tipping the relevant special factors are set out in chapter 5.3.

In addition to the principles set out in the corporate governance guidelines, article 6 of the company’s articles of association stipulate that the owning ministry shall be entitled to issue direct instructions to the company by letter outside of the general meeting.

In line with the government’s expectations in the Report to the Storting on ownership (in Norwegian), Norsk Tipping reports on important matters related to the company’s activities, including the most effective achievement possible of sectoral policy objectives.

The articles of association stipulate that the company’s objectives are as follows:

“The company shall, in accordance with gaming regulations stipulated by the Ministry, arrange and communicate gaming activities safely and subject to governmental control with a view to preventing any negative consequences of the gaming activities, while also ensuring rational operations which shall permit as much as possible of the gaming activities’ earnings to be funnelled to the purposes mentioned in section 10 of the Gaming Act.” (Article 2, paragraph two).

“The company’s activities shall involve the promotion of gaming targeted at Norwegian citizens or people resident in Norway.” (Article 4, paragraph one).

In May 2017, the government presented St. 12 (2016–2017) Report to the Storting (white paper) ‘Everything to Gain – A Responsible and Active Gaming Policy’ (in Norwegian), which was adopted by the Storting.

The White Paper clearly states that the government’s main gaming policy objective is to safeguard responsible gaming and that the principle of responsibility shall take precedence over commercial considerations. At the same time, a policy promoting responsible gaming presumes that the regulated gaming companies offer attractive products with the ability to engage players and in doing so divert them from unregulated gaming providers that offer products in less responsible settings.

The Board considers and adopts the company’s strategy. The Board determines key targets for responsible gaming, customers, market shares, reputation, and surplus funds for good causes every year, along with the associated appetite for risk.

The Board monitors activities through monthly activity reports presented by the senior management team at ordinary board meetings. Activity reports detail the development and status of key metrics. The reporting is risk-based and includes current updates on the company’s risk picture and associated risk mitigation measures. These processes ensure that the Board plays an active role in the governance and control of the company.

Minutes are kept that record decisions taken following consideration of the activity reports.

Responsible gaming is a prerequisite for the company and a special policy has been established for this area. The policy document contains nine principles that provide the basis for Norsk Tipping’s promotion of responsible gaming at all levels of the organisation. The main points of the policy are available on the company’s website.

In line with the government’s expectations in the Report to the Storting on ownership, Norsk Tipping reports on important matters related to the company’s activities.

The company’s materiality analysis is revised regularly. A new assessment was conducted in winter 2020-2021. The participants in the process were managers and employees with special responsibility for topics directly related to the company’s value creation and strategy. The topics that appeared to be of increased importance for the company going forward were the company’s management of ethics and social conditions in its supply chain, and the climate and environmental impact of the company’s consumption. The final analysis was presented to the Board.

The aim of the company’s social responsibility and sustainability work is to ensure that “Norsk Tipping takes responsibility for its impact on people, society and the environment.” The work must be based on materiality, and the operational follow-up based on due diligence principles.

The company’s materiality analysis was updated in 2021. Five main areas were prepared based on the main topics.

In ‘Social responsibility and sustainability’ (in Norwegian) you can read more about how Norsk Tipping manages its impacts within the respective areas.

Norsk Tipping’s share capital totals NOK 150,000, as stipulated in section 5 of the Gaming Act. The company also has NOK 150 million in non-distributable equity. It does not pay dividends, rather the surplus funds from gaming activities must be allocated in line with the provisions of section 10 of the Gaming Act.

The company’s shares are owned by the Ministry of Culture and Equality. The recommendations are therefore not relevant for Norsk Tipping.

Not relevant to Norsk Tipping, see chapter 4.

The Minister of Culture and Equality constitutes the company’s general meeting. In accordance with article 6 of the company’s articles of association, a general meeting is held annually. In a company where the general meeting is constituted by a single individual, there are no protocols regarding notices of meetings and authorisations, or formal requirements regarding the receipt of case documents prior to the general meeting. Nonetheless, notices of meetings and case documents are sent out prior to general meetings. Minutes are also kept of general meetings. The Office of the Auditor General of Norway, an external auditor, the Board, and the CEO all attend general meetings.

Minutes from general meetings are published on the company’s website.

Norsk Tipping does not have a control committee.

Board members are selected by the Ministry of Culture and Equality and consequently the company has no nomination committee.

The Board and its composition are governed by article 3 of the articles of association. The Board comprises six independent representatives appointed by the Ministry of Culture and Equality and two representatives from Norsk Tipping elected by the company’s employees. Board members are elected for two years at a time. Personal deputies were also appointed for each of the employee-elected board members. The term ‘independent representatives’ is understood to mean that they are independent of influence from surplus funds recipients.

In 2007, the articles of association were amended to clarify that gender representation on the Board must comply with the gender representation requirements in section 20-6, paragraph one of the Limited Liability Companies Act. The corporate governance guidelines issued by the Ministry of Culture and Equality stipulate requirements regarding the composition of boards with respect to board members’ expertise, capacity, and diversity. In line with the article 6 of the company’s articles of association, the suitability of the board members must be assessed.

Employees of Norsk Tipping have the opportunity to raise issues via the employee-elected members of the Board. The CEO of Norsk Tipping attends board meetings but has no voting rights.

The Ministry of Culture and Equality has issued instructions to the Board that are established by Royal decree. The Board Chair is not a member of the company’s senior management team. The consideration of cases by the Board must comply with governmental rules and the company’s ethical guidelines on impartiality. Every board meeting starts with clarifying the impartiality of the board members in relation to the items on the agenda. However, the instructions do not include a duty to disclose their interests. A process to include this in the instructions has commenced.

The procedures for the Board’s work and deliberations are contained in the ministry’s guidelines for the ownership of companies within the Ministry of Culture and Equality’s area of responsibility and the ministry’s instructions for the Board. In line with the instructions from the Ministry, the Board must take decisions independently based on ordinary commercial principles.

The Board must conduct an annual evaluation of its work, qualifications, and procedures. These evaluations provide the basis for any changes and measures. Minutes must be kept of the Board’s consideration of its own evaluation.

The Board has issued instructions for the CEO. The CEO, in cooperation with the Board Chair, prepares matters for consideration by the Board. During the preparation and presentation of such matters, the emphasis must be on providing the Board with a satisfactory basis for making decisions. The Board regularly evaluates the achievement of sectoral policy objectives and whether they are being achieved in a sustainable, responsible, and effective manner.

At its meeting on 2.10.2012, the Board of Norsk Tipping issued a document titled ‘Instructions for the Board’s Audit Committee in Norsk Tipping AS’ and the Audit Committee was formally constituted on 1.11.2012. The Board’s remuneration committee was established in a board meeting on 30.8.2017. The Board established the ‘Instructions for the Board’s remuneration committee’ in a board meeting on 26.9.2017.

More information is provided about these in sections 10 and 12, respectively.

The Board bears overall responsibility for organising risk management. It is organised into three lines of defence in order to split up the work and achieve satisfactory independence between decision-makers and supervisory and reporting functions. This is a recognised model, which is illustrated below:

The model also includes the external auditor and the Norwegian Gambling and Foundation Authority in order to demonstrate the completeness of the structures that have been established to ensure independence between decision-makers and supervisory and reporting functions, and so that the fourth line of defence is also visible. The external auditor confirms to the owner, the Board, and the senior management team whether or not the company’s risk management within financial reporting is adequate. The Norwegian Gambling and Foundation Authority is a directorate and supervisory authority that reports to the Ministry of Culture and Equality and administers and regulates private lotteries and state-regulated gaming in Norway. The Norwegian Gambling and Foundation Authority conducts audits to ensure that the company’s gaming activities comply with the law and gaming regulations, ref. section 14 of the Gaming Act.

The objectives of risk management and control are to ensure the quality of internal and external reporting, that operations are goal-oriented, efficient, and customer-oriented, and continuous improvements in quality. Norsk Tipping has established an integrated quality assurance system that consists of governance documents in the form of policies, guidelines, and procedures. The governance documents act as guidelines in areas where compliance is essential for the company.  Compliance and goal achievement are systematically monitored through non-conformance reporting, self-evaluations, quality audits, and internal and external audits. The results of this monitoring are reported to the Board via the Audit Committee and provide a basis for the Board’s review of the company’s key risk areas and internal control. The company has established a crisis management system and regularly conducts exercises.

Risk management is an integral part of business activities. An updated risk picture is included as part of the monthly reporting to ensure that the Board and senior management team focus on important future issues that could impact the company’s goal attainment. Risk mitigation measures must be specified, and deadlines set for their implementation.

The company is constantly striving to ensure a good control environment is in place that will ensure that it operates in compliance with relevant laws, that it is based on healthy attitudes, that it has good internal routines and procedures, and that it is transparent. A set of values and management principles have been developed that are intended to build on the company’s social mission.

The company systematically evaluates whether or not the internal control is satisfactory in order to prevent and detect financial irregularities. Processes are regularly selected for evaluation based on an overarching risk assessment. Norsk Tipping has established routines for checking and monitoring the gaming activities of players and at sales agents. This is done both to ensure that gaming activities take place within a responsible framework and to protect the company from criminal activities.

Norsk Tipping has an audit committee, which is a subcommittee of Norsk Tipping’s board. The committee is tasked with acting as a preparatory body for the Board with respect to the company’s financial reporting and control systems, ref. section 9. Once a year, the external and internal auditors meet with the Audit Committee without anyone from the senior management team present.

The company has an internal audit function that reports to the Board via the Audit Committee. The purpose of the internal audit function is to help the Board and senior management team of Norsk Tipping practise good corporate governance.

Norsk Tipping is certified (PA1) in accordance with ISO/IEC 27001 and the World Lotteries Association Security Control Standard (WLA-SCS). Norsk Tipping is recertified in accordance with the standards on an annual basis. These two standards focus on auditing whether or not a company’s information security management system is satisfactory and appropriate.

Norsk Tipping is certified in line with the responsible gaming standards of the European Lotteries and Toto Association (EL) and the World Lottery Association (WLA). The certification processes are carried out by an independent external auditor. The certificates are valid for 3 years at a time and require periodic audits in order to verify that the company is meeting the standard’s requirements.

Board members receive a fixed annual fee that is not linked to the company’s financial performance. The fee amounts are determined by the Ministry of Culture and Equality. This information is publicly available in the notes to the annual accounts.

The Board has established a remuneration committee that acts as an advisory body for the Board in matters to do with the pay policy for Norsk Tipping’s senior managers in general and the CEO’s pay and working conditions in particular.

In 2019, the Board drew up an executive remuneration policy for Norsk Tipping to ensure, among other things, that it complies with the legislation and established principles regarding good corporate governance.

In line with the government’s expectations in the Report to the Storting on ownership, section 10.4, the company facilitates a high degree of transparency in relation to the pay of senior executive personnel. In line with Norsk Tipping’s corporate bylaws concerning executive remuneration, the Board must present the general meeting with a statement regarding executive remuneration, ref. the government’s guidelines on state ownership.

The remuneration of the CEO is set out in the note 2 to the annual accounts. The CEO sets the remuneration and other conditions for the company’s executive persons based on the Board’s established principles for executive pay. An overview of the pay and benefits of the company’s senior executive persons is provided in note 2 to the accounts.

No additional remuneration is paid to employee representatives who hold seats on the boards of companies that are wholly or partly owned by Norsk Tipping.

No employees receive performance-related remuneration in the form of options or bonus arrangements.

Even though the company is exempt from the Freedom of Information Act, the company is expected to be as open and transparent as possible. The company has established special guidelines that regulate how it practises openness and transparency, the aims of which are to ensure that the company fulfils, insofar as it is possible, public expectations regarding transparency in connection with its business activities.

Norsk Tipping’s reporting of financial information must be open and transparent. As well as describing the company’s economic and financial position, it must provide users with a relevant, detailed, and reliable summary of the company’s strategies, objectives, and results.

Not relevant to Norsk Tipping.

Auditing arrangements at Norsk Tipping entail a delegation of the relevant control activities. An elected external auditor conducts an audit of the company’s accounts, while the Office of the Auditor General of Norway conducts a company and administrative audit. The external auditor is appointed by the Ministry of Culture and Equality on the basis of a prior procurement pursuant to the Public Procurement Act.

Each year, the auditor presents an audit plan together with a status report on the company’s internal control procedures. This is considered by the Audit Committee. The auditor attends board meetings at which the Board reviews the company’s accounts, and also attends the company’s general meetings at which the annual accounts are presented for final approval. The auditor consults the Audit Committee on matters related to conducting the audit of the annual accounts. Services other than auditing must be approved by the Audit Committee. The auditor’s remuneration is presented to the general meeting for approval. The fees and remuneration paid to the auditor are specified in the notes to the annual accounts.