Corporate Governance
About Eimskip
Eimskipafélag Íslands hf. (Eimskip) is a leading transportation company in the North Atlantic providing container and reefer liner services with connections to international markets and is specialized in worldwide freight forwarding services with focus on frozen and chilled commodities.
Corporate Governance
With this statement on the Corporate Governance of Eimskip it is declared that the Company is complying with the accepted practices in the 6th edition of Corporate Governance Guidelines, issued by the Iceland Chamber of Commerce, SA - Business Iceland and Nasdaq Iceland.
Corporate Governance practices are designed to ensure open and transparent relationship between the Company’s management, its Board of Directors, its shareholders, and other stakeholders. The Corporate Governance in Eimskip is also designed to ensure sound and effective control of the Company’s affairs and a high level of business ethics.
The Corporate Governance Statement of Eimskip is accessible on the Company’s website, www.eimskip.com/investors, and is published in a special chapter in the Company’s Financial Statements.
The Corporate Governance Guidelines are accessible on www.leidbeiningar.is/english.
Laws and Regulations
Eimskip is a limited liability company, has its shares listed on Nasdaq Iceland and is therefore governed by Act No. 2/1995 on Limited Liability Companies (Company Act), Act No. 3/2006 on Annual Accounts, laws and regulations that apply to listed companies, along with its Articles of Association, Rules of Procedures for the Board of Directors and the Board’s subcommittees and various Company policies. Acts are accessible on Parliament’s website, www.althingi.is, and rules and policies on the Company’s investor website.
Eimskip’s Financial Statements
Eimskip’s financial year is the calendar year. The Company’s Financial Statements are accessible on the Company’s website, www.eimskip.com.
Shareholder Relations
The supreme authority of the Company is in the hands of the shareholders who attend shareholders’ meetings at least once a year. The share register is held at the Company’s headquarters where it is available to shareholders.
Company news that is considered to affect Eimskip’s share price is published through the company news release distribution network of Nasdaq Iceland and on the Company’s IR website, www.eimskip.com/investors. Other news is published on the Company’s website, www.eimskip.com.
Proposals or questions from shareholders to the Board of Directors shall be sent to investors@eimskip.com and complianceofficer@eimskip.com.
The Board of Directors of Eimskip
The Board of Directors holds supreme authority between shareholders’ meetings. It shall ensure that the Company’s organization and operations are in good order. It shall promote the development and long-term performance of the Company and supervise its operations. The Board of Directors has a statutory role which it is responsible for, unless the Board grants permission by law to transfer authority by delegation.
Board meetings are called with a one-week notice. A meeting schedule is made for the financial year in advance. The invitation contains the agenda for the meeting. The CEO and the CFO attend Board meetings, and other members of the Executive Management attend as required. The General Counsel serves as secretary to the Board. In 2023, the total number of Board meetings was 14, all members attended all meetings and the Board was competent to make decisions in all meetings.
The Board consists of five Directors and two Alternate Directors, and they are all elected annually at the Annual General Meeting. Those who intend to run for the Board of Directors shall notify the Board of Directors of their candidacy at least ten days before a shareholders’ meeting. The majority of the Directors of the Board are independent of the Company and its day-to-day management, and four Directors are independent of the Company’s significant shareholders. The alternate members of the Board are either independent or not independent of the Company or its significant shareholders. The Board evaluates whether Directors are independent of the Company and its significant shareholders. Moreover, the Board evaluates the independence of new Directors before the Company’s Annual General Meeting and makes available to shareholders the result of its evaluation.
Annually, the Board of Directors conducts an assessment of its work, size, composition, and procedures and also evaluates the work of the Company’s CEO, the Company’s operations and development and whether it is in line with the Company’s objectives. The assessment entails e.g. evaluation of the strengths and weaknesses of the Board’s work and practices and takes into consideration the work components the Board believes may be improved. The evaluation is built on self-assessment, but the assistance of outside parties may be sought as appropriate. The evaluation includes an examination of whether the Board has operated in accordance with its Rules of Procedure and how the Board operates in general. Examination must be made as to whether important matters relating to the Company have been adequately prepared and if enough time is provided for discussions within the Board. Additionally, individual Directors must be considered with respect to both attendance and participation in meetings. The assessment for the financial year 2023 was concluded in February 2024.
Main responsibilities of the Board of Directors
To hold supreme authority between shareholders’ meetings, promote the development and long-term performance of the Company and supervise its operations. The Board shall regularly assess the performance of the Company’s Executive Directors and how the Company’s policies are implemented.
To take the initiative, together with the CEO, on formulating policies and setting goals and risk parameters for the Company, both in the short and long term.
To establish an active system of internal controls. This means, among other things, that the arrangement of the internal controls system shall be formalized, documented, and its functionality verified regularly.
To ensure that the Company’s operations are in conformity with existing laws and regulations.
To handle the recruitment and dismissal of the Company’s CEO.
Extraordinary or major matters which require the approval of four out of five Directors and are therefore not a part of the CEO’s day-to-day operations are defined in the Rules of Procedure for the Board of Directors.
Rules of Procedure for the Board of Directors
The Board of Directors has established its Rules of Procedure which were amended and approved at a Board meeting on 26 April 2019. A copy can be obtained from the Company’s investor website.
The Board of Directors has appointed three subcommittees; the Audit Committee, Remuneration Committee and Nomination Committee.
The principal duties of the Audit Committee are to review all financial information and procedures regarding information disclosure from day-to-day management and the Company’s independent auditors and to ensure the independence of the Company’s independent auditors. The role and main responsibilities of the Audit Committee are set out in its rules of procedure.
Members of the Audit Committee are Lárus L. Blöndal, Chairman; Ólöf Pálsdóttir; and Alexander G. Edvardsson. In 2023, the Audit Committee held a total of seven meetings, all members attended all meetings and the Committee was competent to make decisions in all meetings.
The role of the Remuneration Committee includes preparing the Company’s Remuneration Policy and ensuring its enforcement and negotiating with the CEO on wages and other employment terms. The role and main responsibilities of the Remuneration Committee are set out in its rules of procedure.
Members of the Remuneration Committee are, Óskar Magnússon, Chairman; Gudrún Blöndal and Baldvin Thorsteinsson. In 2023, the Remuneration Committee held a total of three meetings, all members attended all meetings, and the Committee was competent to make decisions in all meetings.
The role of the Nomination Committee is to assist the Board with the process and oversight of Board succession planning and identification and nomination of Board candidates as well as members of the Board’s committees. The Board is responsible for the appointment and activities of the Nomination Committee, and it operates under the Board’s authority. The role and main responsibilities of the Nomination Committee are set out in its rules of procedure.
Members of the Nomination Committee are Margrét Guðmundsdóttir, Chairman; Lárus L. Blöndal; and Óskar Magnússon. In 2023, the Nomination Committee held a total of three meetings, and all members attended all meetings.
The Chief Executive Officer
The Company’s CEO is responsible for the day-to-day operations, in accordance with law, regulations and the Company’s Articles of Association and follows the policies and instructions laid down by the Board. The CEO must at all times conduct his work with integrity and take account of the Company’s interests. Day-to-day operations do not include matters which are unusual or of great significance. The CEO shall make sure that the Company’s accounts are kept in accordance with law and practice and that the Company’s assets are kept in a secure manner. The CEO is obligated to abide by all instructions of the Board of Directors and shall give the auditor any information requested. The CEO does not have the authority to make decisions concerning any matters that are assigned to others by law or are reserved to the Board under its Rules of Procedure. The CEO shall ensure that Directors of the Board are regularly provided with accurate information on the Company’s finances, development and operations to enable them to perform their duties and the information shall be in the form and of the quality determined by the Board. The information shall be available when needed and as up-to-date and accurate as possible. The CEO is to acquaint the Board with all major issues involving the operations of the Company or its subsidiaries and is to attend the Board meetings. He participates in the Boards of the subsidiaries within the Group.
Executive Management
The Executive Management of Eimskip consists of the Chief Executive Officer; Chief Financial Officer, Chief Operating Officer, Chief Information Officer; the Executive Vice Presidents of International Operations, Human Resources and Communication, Iceland Sales and Business Management, and Iceland Domestic Operations and the General Counsel and Compliance Officer.
Further information on the Executive Management is on the Company’s Investor website.
Diversity
The Company issued a policy on diversity, as part of the Company's Human Resource Policy, in connection with the Board of Directors, Executive Management and Senior Management on 27 January 2022. The policy can be found on the Company’s investor website.
Internal Control and Risk Management
As a global Company, Eimskip is exposed to multiple risks in its daily business. Active management of risks plays a vital role in the Company to ensure stable operations and earnings. The Board of Directors has overall responsibility for the establishment and oversight of Eimskip's risk management framework.
Eimskip’s internal control and risk management procedures regarding financial processes are designed to minimize the risk of material misstatements in financial reporting. The Company does not have an internal audit function but uses internal control systems that are monitored by management and the Audit Committee.
An independent auditing firm is elected at the Annual General Meeting each year. The auditors are tasked with reviewing Eimskip’s accounting records and material related to the Company’s operations and financial position. As such, they have access to the Company’s books and documents at all times. They must examine the Company’s Consolidated Financial Statements in accordance with International Standards on Auditing (ISAs). Significant findings regarding accounting and internal control deficiencies are reported to the Board of Directors through the Audit Committee. Independent auditors are not allowed to own shares in the Company.
The Company goes through a detailed strategic and budgeting process each year and a strategy and budget report are prepared. The Board of Directors approves the Company’s strategy and budget each year. Deviations from the strategy and budget are carefully monitored on a monthly basis.
In 2023 the Company has implemented a holistic Enterprise Risk Management (ERM) to monitor and mitigate risks that face the company on a Group level. All risks are assessed according to likelihood and impact and a risk owner is assigned to ensure accountability. The ERM program is aimed at minimizing potential negative effects on operations and earnings from marketing, operational, and financial activities and to keep risks at acceptable levels.
Further information on risk management and risk factors can be found under Risk Management and Risk Factors.
Sustainability
Eimskip is a registered participant of the UN Global Compact, the United Nation’s initiative for social responsibility with respect to human rights, labor, environment, and anti-corruption. With its participation, the Company has committed to managing its business operations so that the UN Global Compact and its Ten Principles become a part of the Company’s strategy, culture, and day-to-day operations.
Eimskip’s Sustainability Policy is based on the Nasdaq ESG Reporting Guide. The policy was reviewed in 2023 Further information on sustainability at Eimskip can be found in the Non-Financial information in the Annual Financial Statements and on the Company’s website, www.eimskip.com/about-eimskip/sustainability.
Code of Conduct
The Board of Directors approved a revision of the Company’s Code of Conduct in February 2023. The Code of Conduct closely links to the Company’s values: Achievement, Cooperation and Trust. The Code is also based on Eimskip’s aim to secure good return for shareholders with profitable growth, create value for customers with outstanding solutions and services, be an outstanding workplace for employees with great team spirit and ambition and show concern for society with social responsibility and reduced ecological footprint.
The purpose of this Code of Conduct is to support Eimskip’s mission and vision. It applies to the Board of Directors and all employees of Eimskip and its subsidiaries and guides them in conducting the Company’s daily activities in an honest, responsible, and ethical way, based on its values, and generally accepted professional standards of conduct.
Suppliers and subcontractors are also required to conform to high standards. The Code of Conduct is accessible on the Company’s website, www.eimskip.com.
Shareholder Information
Share Capital
Eimskip’s shares started trading on Nasdaq Iceland on November 16, 2012 with the ISIN number IS0000019800 and under the ticker symbol EIM.
Total number of shares 2023 was 164.375.680. Each share has a nominal value of ISK 1.00 and entitles its holder to one vote. The Company holds 3,474,320 shares in treasury, corresponding to 2.07% of the total issued share capital of the Company. Outstanding shares are 167.85 million. The number of shareholders at year-end 2023 was 942 which was a decrease of 42 from the beginning of year.
Largest Shareholders
At the end of 2023, three of Eimskip’s shareholders each owned over 10% in the Company: Seley ehf. owned 33.82% of outstanding share capital, Gildi – lífeyrissjódur owned 12.96%, and Lífeyrissjódur verzlunarmanna was the third largest with 12.46%. The 10 largest shareholders held 86% of the total outstanding shares at year-end 2023.
10 LARGEST SHAREHOLDERS
As at December 31 2023
DISTRIBUTION OF SHARES
As at December 31 2023
SHARE PRICES
2023 and 2024
Share Prices and Market Capitalization
The closing price of Eimskip’s shares on March 1, 2024 was ISK 391 per share with market capitalization based on outstanding shares in the amount of ISK 64.3 billion, equal to EUR 429.8 million.
Dividend Policy
The policy of Eimskipafélag Íslands hf. is to pay an annual dividend that equals an amount in the range of 10 - 65% of net earnings. Decisions on dividend payments and their exact amount are subject to the Company’s future investment plans, market outlook, and satisfactory capital structure at any given time. The dividend policy is accessible on the Company’s website.
The Board of Directors proposed to the Annual General Meeting 2024 a dividend payment to shareholders in the amount of ISK 22.53 per share. The proposed dividend payment is ISK 3.7 billion or approximately EUR 25.0 million, which represents 45.9% of net earnings for the year 2023.
Investor Relations Policy
Eimskip recognizes the value of transparent and open communication with the Company’s stakeholders, consistent with commercial confidentiality and regulatory considerations. Stakeholders include investors, employees, customers, suppliers, the media, local communities, and authorities.
The Board has issued an Investor Relations (IR) Policy, which outlines the objectives and processes for effective communication between Eimskip and its various audiences. The IR Policy is available on the Company’s website.
Other Shareholder Information
Eimskip’s Investor Relations website provides information for investors, market participants and others. The website contains information about the Company, such as Corporate Governance documents, financial reports and presentations, Annual Reports, documents relating to Annual General Meetings, a general presentation on Eimskip, share information, news releases, and investor contacts.
Risk Management and Risk Factors
RISK MANAGEMENT FRAMEWORK
As a global Company, Eimskip is exposed to multiple risks in its daily business. Active management of risks plays a vital role in the Company to ensure stable operations and earnings. The Board of Directors is responsible for establishing and overseeing Eimskips’ risk management framework.
Eimskip’s internal control and risk management procedures regarding financial processes are designed to minimize the risk of material misstatements in financial reporting. The Company does not have an internal audit function but uses internal control systems that are monitored by management and the Audit Committee.
An independent auditing firm is elected at the Annual General Meeting each year. The auditors are tasked with reviewing Eimskip’s accounting records and material related to the Company’s operations and financial position. As such, they have access to the Company’s books and documents. They must examine the Company’s Consolidated Financial Statements in accordance with International Standards on Auditing (ISAs). Significant findings regarding accounting and internal control deficiencies are reported to the Board of Directors through the Audit Committee. Independent auditors are not allowed to own shares in the Company.
The Company goes through a detailed strategic and budgeting process each year and a strategy and budget report is prepared, which is then approved by The Board of Directors. Deviations from the strategy and budget are carefully monitored monthly.
ENTERPRISE RISK GOVERNANCE
The Board of Directors governs risk management within the Company, while the Audit Committee is responsible for regularly overseeing Enterprise Risk Management’s (ERM) framework and effectiveness. The Board of Directors periodically communicates with the CEO regarding the identification of, description of, and response to risks that the Company could face. The Executive Management is responsible for identifying material risks and developing the Company’s risk management strategy, tolerance, and appetite. Members of the Executive Management manage their Risk Portfolio; ensure that the registers are complete, accurate, and current; and ensure appropriate controls are identified and effective. All risks get an owner, which is important to ensure action and accountability.
The Company’s risk exposure is discussed at Executive Management meetings and Audit Committee meetings, and risk management and risk factors are outlined in the Annual Report. The Company’s ERM structure, roles, and responsibilities are below.
Board of Directors
Governs risk management within the Company
Audit Committee
Oversees the framework and effectiveness of ERM within the Company
Review the risk register
Enterprise risk manager
Oversee the ERM process, review the risk assessment and ensure policy compliance
Risk coordinator
Coordinates the Company’s ERM activities
Risk portfolio managers
Maintain ERM register within their Risk Portfolio
Ensure all risks are identified, accurately described and accurately scored
Executive management
Oversees the framework and effectiveness of ERM with the Company
Risk owners
Owns and manages risks that have been assigned to them
ENTERPRISE RISK MANAGEMENT
The Company has in 2023 implemented a holistic Enterprise Risk Management (ERM) framework to identify and manage risks for the Company. ERM aims to identify potential events that may affect the Company’s ability to achieve its goals and to protect and create value for the Company and its shareholders. Furthermore, it ensures risk awareness throughout the Company.
The Company regularly identifies risks through interviews with members of Executive Management and with workshops where risk owners and other stakeholders participate. Following those, likelihood and impact are assessed and relevant controls are identified. Risks are divided into 4 main Portfolios: Human Resource and Communications, IT and Data Security, Finance, and Operational.
By taking ownership of the risks, the appointed owner, responsible for managing the risk, identifies appropriate controls and ensures regular monitoring based on the risk score. Comprehensive risk management oversight is conducted through regular ERM Forum meetings.
Risk Management
HUMAN RESOURCE RISKS
Human resource risks refer to potential employee-related challenges that could impact the Company’s performance. These challenges range from employee turnover and lowered engagement to limited opportunities for learning and development or vocational training resources, decreased performance, workplace bullying, and knowledge transfer gaps. To address these risks, Eimskip has implemented various proactive strategies. These initiatives include regular employee satisfaction surveys to uncover and address underlying issues, offering competitive compensation and benefits, providing training and opportunities for professional development and career advancement, and cultivating an inclusive and positive work culture across the organization. These measures aim to enhance employee well-being and satisfaction, retention, productivity, and organizational resilience.
There are various risks related to brand and reputation. These are risks that can potentially cause damage to the Company’s brand image or perception in the eyes of stakeholders, including customers, employees, investors, and the public. These risks can come from miscellaneous sources, e.g. negative publicity, ethical misconduct, legal issues, competitive actions or actions of management or employees. Managing and mitigating these risks is crucial to maintain trust, credibility, and good will towards the Company. Eimskip does that by having clear work processes, policies, and guidelines and offering regular training to employees. There is a special crisis management team operated within the Company that comes together in case of crisis, ensuring a proactive and strategic approach to managing risks and protecting the organization’s reputation and stakeholders.
IT AND DATA SECURITY RISKS
Eimskip has identified IT and data security risks and has taken steps to mitigate the risks. Eimskip is, like any other company a target for a cyber attack and is aware of the fact that cyber attacks have become increasingly prevalent in recent years and more common to have a high impact on business continuity.
OPERATIONAL RISK
Eimskip’s operations are dependent upon many factors, e.g. access to terminals, IT systems, operation and ownership of vessels, supply of and demand for fuel, international and EU regulations on lower sulfur emissions, inflation, the reputation of the Company, and its ability to retain key personnel and customer contracts. Furthermore, refugees, stowaways, and incidents involving significant damage, loss, or environmental pollution are risk factors for the Company. Changes in the legislative, political, governmental, and economic framework may have a material impact on the Company’s business. The Company is dependent on various licenses relating to its operations and is subject to contractual risk about its obligations to fulfil multiple provisions of its contracts.
FINANCIAL RISK
Eimskip is exposed to financial risk factors, including currency risk, risk related to availability of funding, interest rate risk, liquidity risk, credit risk, tax risk, and fuel price risk.
Eimskip monitors its financial risk factors, and the Board of Directors has approved a Treasury Policy that sets acceptable risk limits and stipulates how to identify, measure, and manage financial risk exposure. The Company has a financial reporting and internal control manual to which the group entities must adhere.
Currency Risk
Eimskip is exposed to currency risk on sales, purchases, and borrowings that are denominated in currencies other than the respective functional currencies of the Group entities.
Most of the Company’s revenue and assets, obligations, and interest-bearing debt are denominated in currencies other than the Icelandic krona. Subsidiaries use the local currency as their functional reporting currency where they are based, except Eimskip Ísland ehf. and the parent company Eimskipafélag Íslands hf., where the functional currency is the EUR.
As seen from the graphs below, Eimskip’s revenue and expenses provide a natural currency hedge to a certain degree. The genuine currency balance of the Company operations provides hedging and the company further utilizes hedging instruments , such as derivatives to mitigate risk.
Assets and liabilities in the balance sheet are primarily denominated in EUR or the relevant operating currency of the entities. The mismatch of other non-operating currencies on the balance sheet is mainly related to the US dollar, as is shown in a table under note 21 in the Consolidated Financial Statements 2023
Funding and Refinancing Risk
Eimskip is exposed to risks related to the availability of funding. To some extent, the Company is dependent on access to sufficient funding at acceptable terms. It may not be able to secure new sources of liquidity or funding should projected or actual liquidity fall below the required levels. These factors could also impact Eimskip’s shareholders’ ability to provide liquidity, and there can be no assurance that the Company could obtain additional shareholder funding. To manage this risk factor, the Company seeks long-term borrowings where applicable, maintains a healthy and stable current ratio, and regularly produces internal short-term cash flow forecasts. In 2019, the Company introduced a target capital structure to keep an equity ratio of around 40% and a leverage ratio of two to three times net interest-bearing debt to EBITDA.
Interest Rate Risk
Interest rate risk is the risk borne by an interest-bearing liability, such as a loan or a bond, due to the variability of interest rates. Eimskip’s interest rate risk exposure is due to its debt and lease liabilities, mainly in EUR and USD. The Company’s long-term debt is primarily based on floating interest rates, and consequently, Eimskip is exposed to fluctuations in the general level of interest rates.
Eimskip can use the debt structure and interest rate swaps to fix interest rates on its long-term borrowings, where a certain proportion of interest rates are to be fixed according to the Group’s Treasury Policy.
The interest rate exposure is carefully monitored and reviewed in line with interest rate developments in financial markets. For further information on Eimskip’s nominal interest rates, a reference is made to note 18 in the Consolidated Financial Statements 2023.
Liquidity Risk
Liquidity risk refers to the potential difficulty Eimskip may face in meeting its financial obligations, particularly those settled through cash or other financial assets. Eimskip’s approach to liquidity management is designed to ensure it consistently maintains sufficient reserves to fulfill its obligations promptly, even in adverse conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. For further information on liquidity status, reference is made to note 21 in the Consolidated Financial Statements 2023.
Credit Risk
Credit risk is the risk of financial loss if a customer or counterparty in a financial instrument fails to meet its contractual obligations and arises principally from the Company’s receivables from customers and its investment in securities.
Eimskip’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. Each customer accounts no more than 10% of Eimskip’s total revenue.
Eimskip has established a Credit Policy under which each new customer is individually analyzed for creditworthiness before the Company’s standard payment and delivery terms and conditions are offered. The Company’s review includes external ratings when available and, in some cases, bank references. Customers who fail to meet the Company’s benchmark may only transact business with the Company on a pre-payment basis.
Shipped or transported goods may be withheld until payment for service rendered has been received. Eimskip usually does not require collateral concerning trade and other receivables.
Despite these precautionary measures, a general downturn in financial markets and economic activity may result in a higher volume of late payments and outstanding receivables. Eimskip’s sales will depend on the financial position of its counterparties, and there can be no guarantee that the financial position of the Company’s customers and other contract parties will be sufficient to honor their obligations under their contracts with the Company. Even though the Company seeks to recover all outstanding receivables, the write-off amount may increase. Eimskip’s trade and other receivables amounted to EUR 129.9 million at the end of 2023, representing 15.7% of the Company’s revenue.
Fuel Price Risk
Fuel supply and demand are unpredictable, and price fluctuations are based on events outside Eimskip’s control. Therefore, the Company cannot accurately predict the future availability or price of fuel. Several issues, including geopolitical developments, supply of and oil demand, actions by the Organization of Petroleum Exporting Countries (OPEC) and other oil producers, war and unrest in oil-producing countries and regions, regional production patterns, environmental concerns, and other unpredictable events can affect the availability and price of fuel. That may result in future fuel supply shortages and price increases.
Fuel costs accounted for 7.3% of Eimskip’s expenses in 2023. The Company is exposed to fluctuations in crude oil and oil product prices. To minimize its exposure to fluctuations in oil prices, the Company adds a surcharge to its prices, commonly referred to as the Bunker Adjustment Factor (BAF) and the Bunker Adjustment Trucking (BAT), depending on the oil prices at the time of transport. However, significant increases in oil prices could lead to downward pressure on the Company’s tariffs from its customers. The Company is constantly monitoring its exposure to oil price changes and may utilize hedging instruments to limit residual risk.