Remuneration policy

The Board of Directors has set up a remuneration committee consisting of three members – the Chairman, the Vice Chairman and member Einar Fredvik – which sets out NORDEN’sremuneration policy and discusses its implementation with the Board of Management. The remuneration committee convened 3 times during 2007.

 

The remuneration policy reflects the fact that incentive-based remuneration is customary among the shipping companies, which compete across borders for the best employees. Therefore, NORDEN must be able to offer a base salary conforming to market standards as well as incentives to high-performing individuals. The most important incentives are bonuses, share options and employee shares. NORDEN does not wish to lead in terms of salaries, but the recruitment and retention of qualified employees is essential in order to ensure maximum return on the Company’s large investments. Therefore, remuneration has to be a competitive element in NORDEN’s overall employee package, which also includes good career, secondment and supplementary training opportunities, short chains of command, extensive delegation and responsibility, a strong corporate culture, value-based management, etc.

 

NORDEN assesses that the remuneration policy is effective. The Company did not lose any key employees in 2007 and did not have any real difficulty in recruiting experienced specialists.

 

In 2007, NORDEN allotted employees and executives bonuses in the total amount of USD 18.6 million (USD 9.8 million). The increase was due in part to the record earnings for the year and in part to the increased number of employees ashore. But although the amount is up, the proportion of bonuses to the Company’s net profit was lowered to a level of approximately 3%. The previous year, bonuses constituted an extraordinary rate of approximately 5% of the net profit in recognition of the extraordinary performance leading to NORDEN’s significantly improved earnings. But in previous years, the rate was about 3%, which will remain the guideline for bonuses in the future.

 

Of the total bonus amount, USD 16.4 million has been expensed. The remaining USD 2.2 million is conditional on selected executives remaining with the Company in 2008-2010, when the amounts will be expensed as they are earned.

 

As a collective bonus, all employees, including Danish and foreign seamen, received three months’ additional pay, or a pro rata amount for employees with less than one year’s seniority. In 2006, NORDEN distributed a collective bonus of two month’s pay, but this did not include seamen and officers with collective agreements. NORDEN finds it important that all employees should be able to see it on their salary slip when the Company is doing really well, and will therefore continue to pay out collective bonuses like the rest of the business. However, individual bonuses are becoming increasingly important as a targeted effort to reward and retain high performers.

 

92 executives and employees received individual bonuses varying from half a month’s salary to three years’ salary (4.2 months’ salary on average). In total, USD 10.9 million was distributed, in addition to which USD 2.2 million was, as mentioned, paid in the form of stay-on bonuses for six key individuals, including the Board of Management, which means that the payment of these is contingent on continued employment in 2008-2010.

 

The previous year, 52 executives and employees received individual bonuses in the total amount of USD 5.8 million.

 

The Board of Management’s remuneration is disclosed in note 8, ”Staff costs” and note 41 ”Share-based payment”.

 

Carsten Mortensen, President and CEO, and Jacob Meldgaard, Senior Vice President and head of the Dry Cargo Department, have bonus agreements which are renegotiated annually. Under both agreements a cash bonus is payable, which is dependent on the net profit of the Group and the Dry Cargo Department, respectively, taking into account a reasonable minimum shareholders’ return.

 

Carsten Mortensen’s agreement is based on NORDEN’s market cap excluding treasury shares at the last stock exchange trading date (USD 1.8 billion at year-end 2006). Of this market cap, an effective rate of interest of 8% is calculated (USD 146.9 million), and Carsten Mortensen’s bonus is then calculated as 1% of the Group’s net profit over and above the USD 146.9 million, although subject to a ceiling of USD 2.8 million. In 2007, this mechanism resulted in a bonus of USD 2.8 million, half of which will be paid out at the approval of this annual report in March 2008 and the rest in 2009 and 2010, provided that Carsten Mortensen remains with the Company and that NORDEN’s earnings reach a specific benchmark for each of the two years. Jacob Meldgaard’s bonus is calculated in the same way, although based on 60% of the market cap, as the Dry Cargo Department accounts for 60% of NORDEN’s investment framework, and with a personal ceiling of USD 1.8 million.

 

The two bonus agreements will be carried over into 2008, when Carsten Mortensen will receive a bonus only if NORDEN realises a net profit in excess of USD 373.6 million (8% of the market cap excluding treasury shares at the end of 2007) and Jacob Meldgaard will receive a bonus only if the Dry Cargo Department’s net profit exceeds 60% of USD 373.6 million.