Compliance with best practices and with the law wherever it operates, is a key principle in the way Delhaize Group conducts business. Upholding this commitment is important for our continued success.
Corporate governance requirements evolved significantly in the last few years. Delhaize Group closely monitors developments in the corporate governance landscape and continues to strengthen its corporate governance structure where appropriate to ensure that the Company complies with applicable law and follows best practices.
Additional Governance Matters
Disclosure Policy
As recommended by the Belgian Code on Corporate Governance, the Company has adopted a Disclosure Policy that sets out the framework and the guiding principles that the Company applies when disclosing information.
Related Party Transactions Policy
In line with the recommendations of the Belgian Code on Corporate Governance, the Company adopted a Related Party Transactions Policy containing requirements applicable to the members of the Board and the Executive Management in addition to the requirements of the conflicts of interest policy in the Company’s Code of Business Conduct and Ethics. The Company’s Related Party Transactions Policy is attached as Exhibit G to the Company's Corporate Governance Charter.
The Company’s Code of Business Conduct and Ethics is attached as Exhibit F to the Company’s Corporate Governance Charter. The members of senior management of the company and of its subsidiaries completed a Related Party Transaction Questionnaire each year for internal control purposes. Further Information on Related Party Transactions, as defined under International Financial Reporting Standards, can be found under Note 32 to the Financial Statements of 2009.
Insider Trading and Market Manipulation Policy
The Company has a Policy Governing Securities Trading and Prohibiting Market Manipulation (“Trading Policy”) which reflects the Belgian rules of market abuse (consisting of insider trading and market manipulation). The Company’s Trading Policy contains, among other things, strict trading restrictions that apply to persons who regularly have access to material non-public information. More details concerning the Company’s Trading Policy can be found in the Company’s Corporate Governance Charter. The Company maintains a list of persons having access to material non-public information and regularly informes these persons about the rules of the Trading Policy and about upcoming restriction periods for trading in Company securities.
Section 404 of the Sarbanes-Oxley Act of 2002
As a company that has securities registered with the U.S. Securities and Exchange Commission, Delhaize Group must provide (i) a management report on the effectiveness of the Company’s internal control over financial reporting, (ii) an attestation report from the Company’s Statutory Auditor on such management report and (iii) the Statutory Auditor’s assessment of the effectiveness of internal control over financial reporting, as described in Section 404 of the U.S. Sarbanes-Oxley Act of 2002 and the rules implementing such act. Management’s assessment and the Statutory Auditor’s related opinions is included in the Annual Reports on Form 20-F.
The Group’s 2009 annual report filed on Form 20-F includes management’s conclusion that the Group’s internal control over financial reporting is effective as of December 31, 2009. The Statutory Auditor concluded that this management assessment is, in all material respects, fairly stated and that the Group maintained, in all material respects, effective control over financial reporting as of December 31, 2009.
Compliance with the Belgian Code on Corporate Governance
Delhaize Group follows the corporate governance principles described in the Belgian Code on Corporate Governance. In line with the “comply-or-explain” principle of the Belgian Code on Corporate Governance, the Company concluded that the best interests of the Company and its shareholders are served by variance from the Code in a limited number of specific cases. These variances are explained below:
- Provision 4.5 of the Belgian Code on Corporate Governance states, among other things, that directors should not consider taking more than five directorships in listed companies. The Board of Delhaize Group reserves the right to grant a waiver to this rule upon request of a non-executive director. When making its decision, the Board will consider, among other factors, the amount of time the non-executive director will likely have to devote to the Company. The Board of Directors granted such a waiver to Baron Vansteenkiste and Count Goblet d’Alviella, who both serve on the Boards of more than five listed companies.
- Provision 8.8 of the Belgian Code on Corporate Governance prescribes that the level of shareholding for the submission of proposals by a shareholder to the General Meeting of Shareholders should not exceed 5% of the share capital. Even though the Company’s management or the Board of Directors will always consider any proposal submitted by shareholders in the best interest of the Company, the Board is of the opinion that the threshold of 5 % of the share capital is too low to oblige the Company to put any proposal of whatever nature on the agenda of the General Meeting of Shareholders. The Board of Directors therefore retains the principles in this context as prescribed by the Company’s Articles of Association and by Article 532 of the Belgian Company Code which foresee the right of shareholders holding more than 20% of the share capital to ask the Board to convene a General Meeting of Shareholders. Undertakings Upon Change of Control over the Company.
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Provision 5.4./1. of appendix E to the Belgian Code on Corporate Governance prescribes that at least a majority of the members of the Remuneration and Nomination Committee should be independent. Count Richard Goblet d'Alviella and Robert J. Murray are no longer independent under the Belgian Company Code as of May 27, 2010 because they have served on the Board of Directors as non-executive directors for more than three consecutive terms. Therefore, the Remuneration and Nomination Committee is comprised of only half of independent members instead of a majority. The Board of directors is of the opinion that the experience, the in-depth insight into the Company and its operations, and therefore the contribution of Messrs. Goblet d’Alviella and Murray to the work of the Remuneration and Nomination Committee provides substantial benefit to such Committee and the Board, outweighing concerns related to the composition of the Remuneration and Nomination Committee.
Disclosure in accordance with the listing standards of the New York Stock Exchange (NYSE)
Delhaize Group, as a non-U.S. company listed on the New York Stock Exchange (“NYSE”), is permitted to follow home country practice in lieu of certain corporate governance provisions of the NYSE applicable to US domestic companies listed on the NYSE. In accordance with NYSE requirements, Delhaize Group must disclose any significant ways in which its corporate governance practices differ from those followed by U.S. domestic companies under NYSE listing standards. Delhaize Group believes that its corporate governance practices are consistent with those followed by U.S. domestic companies under NYSE listing standards, but notes that two members of the Remuneration and Nomination Committee, Richard Goblet d’ Alviella and Robert J. Murray, do not satisfy the independence requirements of the Belgian Company Code applicable to Delhaize Group because each such director has served on the Board of Directors as a non-executive director for more than three consecutive terms. While the NYSE listing standards require that such committee be composed entirely of independent directors, the NYSE listing standards do not specify a length of service on the Board of Directors that would disqualify a director from being deemed independent.
Undertakings Upon Change of Control over the Company
Management associates of non-U.S. operating companies received warrants issued by the Board of Directors under a 2000 Warrant Plan granting to the beneficiaries the right to subscribe to new ordinary shares of the Company. They also received stock options issued by the Board of Directors under the Stock Option Plan 2001 to 2007, granting to the beneficiaries the right to acquire ordinary shares of the Company. Management associates of U.S. operating companies received options, which qualify as warrants under Belgian law, issued by the Board of Directors under the Delhaize Group 2002 Stock Incentive Plan, as amended, granting to the beneficiaries the right to subscribe to new American Depositary Receipts of the Company. The General Meeting of Shareholders approved a provision of these plans that provide that in the event of a change of control over the Company the beneficiaries will have the right to exercise their options and warrants, regardless of their vesting period. The number of options and warrants outstanding under those plans as of December 31, 2009 can be found under Note 16 to the Financial Statements.
In 2003, the Company adopted a global long-term incentive program which incorporates a Performance Cash Plan. The grants under the Performance Cash Plan provide for cash payments to the beneficiaries at the end of a three-year period that are dependent on Company performance against Board approved financial targets that are closely correlated to building long-term shareholder value. The General Meeting of Shareholders approved a provision of the Performance Cash Plan that provides that the beneficiaries are entitled to receive the full cash payment with respect to any outstanding grant in the event of a change of control over the Company.
On June 27, 2007 the Company issued EUR 500 million 5.625% senior notes due 2014 and USD 450 million 6.50% notes due 2017 in a private placement to qualified investors. Pursuant to an exchange offer registered under the U.S Securities Act, the 6.50% Dollar Notes were subsequently exchanged for 6.50% Dollar Notes that are freely transferable in the U.S. The 67 General Meeting of Shareholders approved the inclusion of a provision in each of these series of notes granting its holders the right to early repayment for an amount not in excess of 101% of the outstanding principal amount thereof in the event of a change of control over the Company.
The Ordinary General Meeting of Shareholders held on May 22, 2008 approved a change in control clause set out in the USD 500 million five-year revolving credit facility dated May 21, 2007 entered into by, among others, Delhaize Group, Delhaize America, JP Morgan Chase Bank, and the lenders under such credit facility, as such clause is used in, and for the purpose of, the “Event of Default” described in such credit facility. This credit facility was amended and restated on December 1, 2009. The Company is required and will submit a proposal to its shareholders at the ordinary general meeting of May 27, 2010 to approve a similar change of control clause in the 2009 amended and restated three-year credit facility.
At the Ordinary General Meeting held on May 22, 2008, shareholders also approved the inclusion of a provision granting to the holders of the bonds, convertible bonds or medium-term notes that the Company may issue within the 12 months following the ordinary shareholders meeting of May 2008, in one or several offerings and tranches, denominated either in US Dollars or in Euros, with a maturity or maturities not exceeding 30 years, for a maximum aggregate amount of EUR 1.5 billion, the right to obtain the redemption, or the right to require the repurchase, of such bonds or notes for an amount not in excess of 101% of the outstanding principal amount plus accrued and unpaid interest of such bonds or notes, in the event of a change of control of the Company, as would be provided in the terms and conditions relating to such bonds and/or notes.
On February 2, 2009 the Company issued USD 300 million 5.875% senior notes due 2014 to qualified investors pursuant to a registration statement filed by the Company with the U.S. Securities and Exchange Commission. The notes contain a change of control provision granting their holders the right to early repayment for an amount not in excess of 101% of the outstanding principal amount thereof in the event of a change of control over the Company.
The Ordinary General Meeting of Shareholders held on May 28, 2009 approved the inclusion of a provision granting to the holders of the bonds, convertible bonds or medium-term notes that the Company may issue within the 12 months following the ordinary shareholders meeting of May 2009, in one or several offerings and tranches, denominated either in US Dollars or in Euros, with a maturity or maturities not exceeding 30 years, for a maximum aggregate amount of EUR 1.5 billion, the right to obtain the redemption, or the right to require the repurchase, of such bonds or notes for an amount not in excess of 101% of the outstanding principal amount plus accrued and unpaid interest of such bonds or notes, in the event of a change of control of the Company, as would be provided in the terms and conditions relating to such bonds and/or notes.
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