Corporate governance

On 5 July 2010, the Ministry of Culture issued guidelines for the corporate governance of companies, etc. that report to the Ministry of Culture.

These guidelines, together with instructions for the Board and for the CEO, clarify the division of roles between the company’s owners, the Board, and the 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 2 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 3 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 3.3.

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.

The Norwegian Gaming and Foundation Authority conducts audits on behalf of the owner to ensure that the company’s gaming activities comply with the law and gaming regulations, cf. section 14 of the Gaming Act. It also assesses the company’s marketing activities on an ongoing basis to ensure that they comply with the rules set out in the guidelines for marketing state-regulated gaming. The results of this assessment are reported to the owner twice a year and are usually published on the Norwegian Gaming and Foundation Authority’s website. The Norwegian Gaming and Foundation Authority is a directorate and supervisory authority that reports to the Ministry of Culture and administers and regulates private lotteries and state-regulated gaming in Norway.

In line with the government’s expectations in the Report to the Storting on ownership (White paper no. 8 (2019 –2020) The State’s Direct Ownership of Companies – Sustainable Value Creation), 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).

Norsk Tipping’s social mission is threefold:

• To provide responsible gaming opportunities
• To provide attractive gaming opportunities
• To generate surplus funds for good causes

In May 2017, the government presented a Report to the Storting on responsible gaming (White paper no. 12 (2016–2017) Everything to Gain – A Responsible and Active Gaming Policy) for debate and approval by the Norwegian parliament (the Storting). This assessed how a responsible and active gaming policy should be implemented going forward. The White Paper was approved, with five requests, and the government thereby decided to continue the current gaming policy model, meaning that Norsk Tipping and Norsk Rikstoto (the horse racing betting company) would retain their respective monopolies.

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 companies offer attractive products with the ability to engage players and in doing so divert them from unregulated gaming organisations that offer products in less responsible settings.

In autumn 2017, the Board passed a revised strategy for following up the contents of the White Paper and the objective of the company as stated in its articles of association. Norsk Tipping’s ambition is for the company to be a world leader in responsible gaming.

The Board considers and adopts the company’s strategy. The Board stipulates key annual targets for responsibility, revenue, customer development, costs, results, and reputation, as well as the associated limits for risk. The Board ensures that risk exposure is within the limits set 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.

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.

Responsible gaming is a key prerequisite for the company. The quality assurance system therefore includes a separate policy focusing on this issue. 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.

The aim of the company’s social responsibility work is to ensure that “Norsk Tipping takes responsibility for its impact on people, society and the environment.” The company takes a risk-based approach to the area and uses due diligence assessments in line with international guidelines where relevant. Norsk Tipping’s social responsibility work is anchored in its quality assurance system by means of its social responsibility policy and associated policies, guidelines, and procedures. The company’s social responsibility policy encompasses areas such as ethical guidelines, responsible gaming, anti-corruption measures, internal and external malpractice, including money laundering, human rights, working conditions, the climate and the environment, and reporting.

Norsk Tipping’s code of conduct and the company’s code of conduct for suppliers are available, unabridged, from the company’s website.

The company is Eco-Lighthouse certified and reports its climate impact every year in its climate and environmental report, which is available from Eco-Lighthouse’s website. Other forms of social reporting are prepared in line with GRI Standards and GRI’s Materiality Principles.

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.

All shares in the company are owned by the Ministry of Culture. The recommendations concerning shareholders are therefore not regarded as relevant to Norsk Tipping. The company owns 50 per cent of the shares in Buypass AS. Transactions between Norsk Tipping and Buypass are based on agreements entered into pursuant to the Public Procurement Act. Putting services out to competitive tender ensures that agreements between parties are entered into on market terms and conditions. The Ministry of Culture requires the auditor to pay particular attention to ensuring that Norsk Tipping’s commercial subsidiaries are acting in accordance with normal market principles and to produce an annual report on these matters. No circumstances have been reported that have required further follow-up by the company.

The company also owns 25 per cent of the shares in the company Lotteries Entertainment Innovation Alliance AS (LEIA). The relationship between the companies is regulated by agreements with the other owners and between the companies.

The company’s code of conduct sets out principles and requirements concerning the impartiality of employees and board members. The code of conduct is intended to ensure that employees do not hold external positions that may give rise to conflicts of interest with the company or compromise the employees’ integrity.

Not relevant to Norsk Tipping.

The Minister of Culture 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 connection with the company’s annual meeting. 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.

The nomination committee is appointed by the company’s sole owner and consists of representatives from the Ministry of Culture.

Norsk Tipping does not have a corporate assembly.

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 two representatives from Norsk Tipping elected by the company’s employees. Two independent deputy representatives are also appointed, where the first deputy member attends board meetings on a fixed basis and there is a personal deputy 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. Board members are appointed for a term of two years.

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 stipulate requirements regarding the composition of boards with respect to board members’ expertise, capacity, and diversity. Board members must be appointed from a broad base and the composition of boards shall meet the requirements stipulated in the Equality and Anti-Discrimination Act. Furthermore, boards must include commercial/corporate economic expertise, expertise in public sector ownership and communication between the public and private sectors, sociopolitical expertise and general social awareness. In addition to this, board members must be socially oriented and be aware of and understand the company’s social role. No particular emphasis is placed on environmental considerations when selecting board members.

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

The Ministry of Culture 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. Board members receive a fixed annual fee that is not linked to the company’s financial performance.

The background and qualifications of each board member are published in the company’s annual report.

The procedures for the Board’s work and deliberations are contained in the Ministry of Culture’s instructions to the Board and its corporate governance guidelines. In line with the instructions from the Ministry, the Board must take decisions independently based on ordinary commercial principles. Furthermore, the Board must ensure that the registration and documentation of accounting information and asset management are subject to satisfactory control, cf. section 7, paragraph one, point two, of the Gaming Act, and supervise the CEO’s management of the company, cf. point three. The Board submits accounts and annual reports to the Ministry of Culture for approval, cf. section 7, paragraph two, of the Gaming Act. The Ministry must also be briefed on matters of principle that are of material importance to the operation of the company.

The consideration of cases by the Board must comply with governmental rules and the company’s ethical guidelines on impartiality. 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.

The Board must hold at least one meeting a year with the auditor that the senior management team does not attend. At its meeting on 2 October 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 November 2012.

The Board has established an audit committee and a remuneration committee. 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 Gaming 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 Gaming and Foundation Authority confirms whether or not the risk management within gaming activities is adequate, cf. section 1 above.

The objectives of risk management and control are to ensure the quality of internal and external reporting, to ensure operations are goal-oriented, efficient, and customer-oriented, and to ensure continuous improvements in quality. In line with a risk-based approach, the company’s most important risk areas have been identified and the internal control is managed via the establishment of a policy and associated guidelines and routines, cf. the discussion of the quality system in section 2 as well. 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 and form the basis for the Board’s review of the company’s key risk areas and internal control. Internal control requirements have been incorporated into this system to ensure the reliability of the accounts and financial reporting, as well as to address the company’s social responsibility. The company has established a crisis management system and regularly conducts exercises.

Risk management is important for the company’s goal achievement and forms an integral part of its business activities. An updated risk picture is included as part of its monthly reporting to ensure that the Board and senior management team focus on important future issues, including responsible gaming. 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 the gaming activities are taking place within responsible limits and to prevent criminal activities.

Audit committee and internal audit function
Norsk Tipping has an audit committee, which is a subcommittee of Norsk Tipping’s board and tasked with acting as a preparatory body for the Board’s supervisory function with respect to the company’s financial reporting and control systems, cf. section 9.

The company has an internal audit function that reports directly to the Board. The purpose of the internal audit function is to help the Board and senior management team of Norsk Tipping practise good corporate governance. An audit plan is prepared on the basis of a risk assessment. The audit plan and the results of audits are presented to the Board via the Audit Committee.

Certification
Norsk Tipping is certified (PA1) in accordance with ISO/IEC 27001:2013 and WLA-SCS:2016 (World Lotteries Association Security Control Standard). Norsk Tipping is recertified in accordance with the standards on an annual basis. The standards focus on auditing whether or not a company’s information security management system is satisfactory and appropriate. The standards also include a total of 248 security checks that have been implemented in the company’s activities. No serious discrepancies related to the security certifications were identified.

Board members fees are not linked to financial performance. The fee amounts are determined by the Ministry of Culture. 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 line with the government’s expectations in the Report to the Storting on ownership, cf. White Paper no. 8 (2019-2020) section 10.4, the company facilitates a high degree of transparency in relation to the pay of senior executive personnel.

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 senior executives based on the Board’s established principles for executive pay. An overview of the pay and benefits of the company’s senior executive personnel 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 on the basis of a prior procurement pursuant to the Public Procurement Act.

Each year, the auditor presents an audit plan to the Audit Committee, together with a status report on the company’s internal control procedures. 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. According to the instructions issued to the Audit Committee, the auditor must attend at least one committee meeting each year at which the CEO and other executive personnel are not present. The auditor consults the Audit Committee on matters related to conducting the audit of the annual accounts. The Board has not established guidelines regarding the senior management team’s right to use the auditor for services other than auditing. However, in the opinion of the Board, the auditor has not provided additional services of a type or scope that could provide grounds for questioning his or her ability to remain independent and objective. 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.