Corporate governance

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 of Culture and Equality’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 5 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 factors are set out in chapter 5.3.

In addition to the principles set out in the corporate governance guidelines, section 11 of the Gaming Act stipulates 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 ownership report to the Storting (Report to the Storting no. 6 (White Paper) 2022-2023) ‘A greener and more active state ownership – The State’s direct ownership of companies’, 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’s purpose is to facilitate a responsible gaming offering and prevent the adverse consequences of gaming in accordance with the Gaming Act. Within this framework, the company must operate efficiently so that as much as possible of the revenue from the company’s gaming offering goes to the purposes listed in section 12 of the Gaming Act.

The company’s activities must be linked to offering gaming targeted at the Norwegian market.”

In Report to the Storting (White Paper no. 12 (2016-2017)) ‘Everything to Gain – A Responsible and Active Gaming Policy’ clearly states that the government’s main gaming policy objective is to ensure 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, number of 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 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.

Norsk Tipping is a limited liability company wholly owned by the State pursuant to section 11 of the Gaming Act. It does not pay dividends, rather the surplus funds from gaming activities must be allocated in line with the provisions of section 12 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 section 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. The articles of association specify some regular items that must be discussed during the general 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 for 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.

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 7 of the articles of association. The Board has at least five independent representatives appointed by the Ministry of Culture and Equality and three representatives elected by and from among the company’s employees. Board members are elected for 2 years at a time. Personal deputies were also appointed for each of the employee-elected board members.

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 stipulate requirements regarding the composition of boards with respect to board members’ expertise, capacity, and diversity.

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. Section 5 of the instructions for the Board specifies the board members’ duty to disclose conflicts of interest.

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.

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.

Norsk Tipping’s Board of Directors established an audit committee on 1.11.2012. The instructions for the remuneration committee were last updated at the board meeting on 24.6.2021. The Board’s remuneration committee was established in autumn 2017 and the Board stipulated ‘Instructions for the Board’s remuneration committee’ 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 Gaming 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 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 Gaming Authority conducts audits to ensure that the company’s gaming activities comply with the law and gaming regulations, ref. the Gaming Act, chapter 5.

The objectives of risk management and internal 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 the gaming activities are taking place within responsible limits and to protect the company against criminal activities.

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

Certifications
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. The 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 confirm 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 and in our report on remuneration for executive persons (in Norwegian).

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. The CEO sets the remuneration and other conditions for the company’s executive persons based on the Board’s established principles for executive pay.

The articles of association state that the company must comply with section 6-16(a) of the Public Limited Liability Companies Act concerning the determination of salary and other remuneration for executive employees, section 6-16(b) report on salary and other remuneration paid to leading persons and the ‘Regulations on guidelines and reports on remuneration for leading personnel’. The remuneration report in accordance with section 6-16(b) of the Public Limited Liability Companies Act and Regulations must be available before the annual general meeting from and including 2023 and be published on the company’s website.

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 is subject to the Transparency Act and obliged to disclose information on how the company deals with adverse impacts on fundamental human rights and decent working conditions.

Norsk Tipping’s reporting of financial information must, as well as describing the company’s economic and financial position, provide 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 of Norsk Tipping. 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 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. 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.