Corporate governance, remuneration policy and system, Conflicts of interest

Corporate governance and corporate management

Qred is a banking company licensed to conduct banking activities in accordance with the Banking and Financing Activities Act (2004:297).

The general meeting 

The AGM is Qred's supreme decision-making body, where shareholders exercise their voting rights and decisions are made on matters such as the balance sheet and income statement in the annual report, discharge from liability, board members for the coming year and the election of auditors.

Board of directors 

Qred's Board of Directors is responsible for Qred's organization and management of the business in accordance with, among other things, the Swedish Companies Act, and has overall responsibility for ensuring that the business is run in accordance with good internal governance and control. Qred's internal management and control is formalized through internal rules in the form of policies and instructions, as well as associated routine descriptions, process descriptions and checklists. 

The Board of Directors shall establish the internal regulations for internal management and control, while the CEO is responsible for implementing them in Qred's operations in line with the Board's instructions. 

The Board is also responsible for ensuring that Qred conducts its business in an ethical and professional manner, that conflicts of interest are identified and managed in an adequate and appropriate manner, and that Qred maintains a healthy risk culture.

Chairman of the Board

The Chairman of the Board leads the work of the Board and ensures that the Board fulfills its obligations in accordance with the Swedish Companies Act and other applicable rules. The Chairman of the Board shall, through contact with the CEO, monitor Qred's development.

Qred's Chairman of the Board is responsible for conducting an annual suitability assessment to ensure that the Board members, CEO and senior executives are individually suitable for their duties at all times. This involves an assessment of whether they

  • has a sufficiently good reputation.
  • Have sufficient knowledge, skills and experience to perform their duties.
  • Can act with honesty, integrity and the ability to think independently in order to assess and challenge decisions where necessary.
  • are able to set aside sufficient time to perform their tasks.

The suitability assessments and results are documented. 

Committees

To support the Board in certain specific areas, the Board has established two committees that are responsible for preparing a basis for decision-making in matters that fall within each committee's area of responsibility: 

  • Remuneration Committee 
  • Risk and Audit Committee

Each committee consists of 2-3 board members and 1-3 senior executives in the company. The committees shall assist the Board of Directors with expertise and prepare proposals, advice and case preparation in their respective areas. The work of the committees is regulated in more detail in instructions.

MANAGING DIRECTOR

The Board of Directors appoints Qred's CEO, who is authorized to make decisions in all matters that are not to be decided by the Board of Directors or the General Meeting. The CEO is responsible for the day-to-day management in accordance with the Board's instructions and for the obligations incumbent on the CEO in accordance with external regulations.

The CEO is responsible for ensuring that policies, instructions, routines and process descriptions are implemented in the organization and that all employees have access to relevant documentation. 

Management team

The company's CEO has an advisory forum, the management group, which is tasked with ensuring that the company's operations are run in a responsible and efficient manner. In its work, the management group shall always take into account the interests of the company and its customers. The management group shall normally meet when necessary, but at least once a month. The CEO convenes and chairs the meetings, which shall have a fixed agenda and be minuted.

Internal governance and control

Three lines of defense

Qred uses the principle of three lines of defense to define where in the organization responsibility for and control of the organization's risk-taking should lie. 

The first line of defense consists of the business operations, including the CEO, who is responsible for and controls the day-to-day risk management and compliance. The business operations are also responsible for performing controls of the processes used by Qred, in the form of internal controls. 

The second line of defense consists of the risk control function and the compliance function, which among other things monitor, control and report on Qred's risks and how the company complies with internal and external rules. The control functions in the second line of defense report to the CEO and are primarily the CEO's independent control body, but shall report directly to both the Board and the CEO. 

The third line of defense consists of the internal audit function. Internal Audit reports directly to the Board of Directors and is the Board's independent control body. The third line of defense reviews and evaluates the first and second lines of defense.

(Swedish version of the above is already available at the bottom of this document).

Remuneration policy and remuneration system

Remuneration policy

Qred has a remuneration policy (the "policy") that aims to describe and establish principles for how the company's remuneration system is designed, controlled and continuously monitored. The Policy shall be consistent with and promote effective risk management and discourage excessive risk-taking. Furthermore, the policy shall ensure that customers' interests are not adversely affected by the company's incentive structure. The remuneration system shall promote Qred's ability to attract and retain competent employees and contribute to the achievement of the company's long-term goals.

The Board of Directors has the ultimate responsibility for the content, establishment, implementation and compliance of the remuneration policy. The policy shall be reviewed regularly, at least once a year, and updated if necessary, before being approved by the Board of Directors. A risk analysis shall form the basis for the board's decision to adopt the policy. The board shall furthermore consider:

  • Remuneration to the management team,
  • Remuneration to the control functions,
  • The outcome and payment of any variable remuneration, and
  • measures to monitor the application of the guidelines.
Remuneration Committee

The Board has appointed a compensation committee. 

The Remuneration Committee is responsible for monitoring and assessing the company's remuneration system at least once a year and preparing decisions on remuneration issues for the Board of Directors. In the follow-up of the remuneration system, the Remuneration Committee shall also monitor the development of unjustified pay differences between women and men.

The board of directors shall, where relevant, follow the general meeting's decisions on remuneration. 

Risk analysis

The company shall conduct an annual risk analysis to identify employees whose duties have a significant impact on the company's risk profile. The analysis shall take into account all risks to which the company is or may be exposed, including the risks associated with this Code and the company's remuneration system. The analysis shall be documented and attached to this Code. The Remuneration Committee shall review the risk analysis before the guidelines are adopted by the Board of Directors.

Compensation system

General principles

The company's remuneration system shall be designed in a way that is compatible with and promotes sound and effective risk management and prevents excessive risk-taking. The remuneration systems shall encourage employees to perform well and help the company to attract and retain competent employees. The remuneration system shall be applied in a gender-neutral manner.

Fixed compensation

Fixed salary

The basis for the company's remuneration system is fixed salary. The fixed salary is determined on a rolling basis, and the first review usually takes place 12 months after the date of employment. As a general rule, the salary review shall take place once a year.

Employees' fixed salaries shall be determined on the basis of objective criteria and be market-based. In the case of new hires, the fixed salary shall be determined based on the market situation for the relevant profile and the value the employee is expected to add to the company. In connection with subsequent salary assessments and changes in work tasks, an individual assessment shall form the basis for determining salary, based on parameters such as work performance, independence, initiative, responsibility and personal development. Discriminatory or other inappropriate differences between employees' fixed salaries shall not occur.

In connection with a salary discussion, the salary-setting manager must conduct a development and salary discussion with the employee, where the connection between work tasks, work results and performance in general, as well as salary development, is made clear to the employee.

Holiday pay is determined in accordance with applicable legislation and individually in connection with employment and salary assessments.

Variable remuneration

The Board of Directors decides on variable remuneration for the management team and employees whose duties have a significant impact on the company's risk profile. The CEO may decide whether other employees (outside the above-mentioned group) shall be entitled to variable remuneration.

The company has a system for variable remuneration in the form of performance-based bonuses for the CEO, the management team and most functions and business units. Performance-based bonuses shall be designed in a way that meets the criteria in this section and the guidelines in general. The criteria for receiving variable remuneration shall be based on the company's overall performance, the employee's individual performance and the performance of the business unit in which the employee works. 

The variable remuneration shall be based on :

  1. Achievement of financial targets related to the budget;
  2. Operational goals for the business and/or
  3. Performance-based goals related to individual or group performance.

Results that form the basis for calculating variable remuneration shall mainly be based on risk-adjusted performance measures. The company shall take into account both current and future risk as well as the cost of capital and liquidity required by the business. The company shall ensure that the variable remuneration is based on long-term sustainable results by assessing the results in a multi-year perspective.

Furthermore, the company's underlying economic cycle and business risk shall be taken into account when approving and paying the variable remuneration. 

When determining variable remuneration, the assessment of the employees' individual results and performance shall take into account both financial and non-financial factors. Among the non-financial factors, the company shall take into account compliance with internal rules, accountability, customer satisfaction and safeguarding of customers' interests.

If the company's control functions for risk control, compliance and internal audit are employed by the company and are entitled to variable remuneration, the company shall ensure that the remuneration is determined on the basis of targets related to the individual control function, regardless of the performance of the business areas they control.

The company shall ensure that any variable remuneration does not affect the company's ability to maintain an adequate capital base or to strengthen the capital base if necessary.

The company shall maintain a reasonable balance between employees' fixed and variable remuneration. Employees' fixed remuneration shall always be at such a high level that the variable part of the remuneration is set to zero. The total variable remuneration to employees must never be at a level that risks undermining the company's capital base and ability to generate a positive result in the long term. The total variable remuneration to an employee shall never exceed 100% of the employee's annual fixed remuneration. The company's sales function, which is completely decoupled from the company's credit function and credit decisions, is exempt from the above limitation, but may never exceed SEK 100,000 per month in variable remuneration.

Guaranteed variable remuneration

As a general rule, the company shall not grant guaranteed variable remuneration to any employee. If there are special reasons, the Board of Directors may decide to guarantee variable remuneration to an employee, but only in connection with new appointments and only during the employee's first year of employment.

Ethical guidelines and conflicts of interest

Qred has established an ethics policy to ensure that the business is conducted in an ethically responsible and professional manner in line with Qred's internal and external rules. The purpose of these guidelines is also to promote transparency, integrity and a corporate culture that protects Qred's business against corruption. 

The Code sets out common standards to promote Qred's ethical approach and to assist employees in situations where applicable rules lack or provide limited guidance. 

Conflicts of interest

Qred has established a policy and instructions for handling conflicts of interest that may arise in the business. 

Qred employees are expected to always act in Qred's best interest and exercise good judgment that is not influenced by private interests or divided loyalties. 

No employee may participate in the handling of a matter or make a credit decision concerning a relative, a relative's company or otherwise where there may be a risk of fraud. Nor may an employee deal with matters in which the employee has a personal interest or in which a relative of the employee has such an interest, or in a company in which the employee or a relative of the employee has a material interest. In such a situation, the employee must be excluded from credit processing and credit decisions. 

Qred's employees shall not purchase goods or services from related parties without prior approval from the CEO, and the CEO shall not purchase goods or services from related parties without prior approval from the Board of Directors. 

Swedish version from which I have translated:

Corporate governance

Qred is a bank limited liability company with a license to conduct banking operations in accordance with the Banking and Financing Business Act (2004:297) ("LBF").

Annual General Meeting 

The AGM is Qred's highest decision-making body where shareholders exercise their voting rights and decisions are made on, among other things, the balance sheet and income statement in the annual report, discharge from liability, Board members for the coming year, and the election of auditors.

Board of Directors 

Qred's Board of Directors is responsible for Qred's organization and management of its affairs in accordance with, among other things, the Swedish Companies Act, and has ultimate responsibility for ensuring that operations are conducted in accordance with good internal governance and control. Qred's internal governance and control is formalized through internal regulations in the form of policies and instructions as well as supporting routine descriptions, process descriptions and checklists. 

The Board shall decide on the internal regulations for internal governance and control, while the CEO is responsible for implementing them in Qred's operations in line with the Board's instructions. 

The Board is also responsible for ensuring that Qred conducts its operations in an ethically responsible and professional manner, that conflicts of interest are identified and managed in an adequate and appropriate manner and that Qred maintains a sound risk culture.

Chairman of the Board

The Chairman of the Board leads the work of the Board and ensures that the Board fulfills its obligations under the Swedish Companies Act and other applicable rules. The Chairman of the Board shall, through contact with the CEO, monitor Qred's development and ensure that the Board members continuously receive the information they need to monitor the Company's position, financial planning and development. 

Qred's Chairman of the Board is responsible for conducting an annual suitability assessment to ensure that Board members, the CEO and senior executives are individually suitable for their assignments at any given time. This involves an assessment of the person in question:

  • Has a good enough reputation.
  • Possess sufficient knowledge, skills and experience to perform their duties.
  • Able to act with honesty, integrity and the ability to think independently to effectively assess and challenge decision-making where necessary.
  • Can set aside sufficient time to perform their tasks.

The suitability assessments and their results are documented. 

Committees

To support the Board in certain specific areas, the Board has established two committees that are responsible for preparing the basis for decisions on issues that fall within each committee's area of responsibility: 

  • Remuneration Committee (Remuneration Committee) 
  • Risk and Audit Committee (Risk and Audit Committee)

Each committee consists of 2-3 Board members and 1-3 senior executives from the Company. The committees shall assist the Board with expertise and prepare proposals, advice and preparation of matters within their respective areas. The work of the committees is regulated in more detail in instructions.

CEO

The Board appoints Qred's CEO, who has decision-making authority in all matters that are not to be decided by the Board or the AGM. The CEO is responsible for day-to-day management in accordance with the Board's instructions and for such obligations incumbent on the CEO under external regulations.

The CEO is responsible for ensuring that policies, instructions and descriptions of routines and processes are implemented and complied with in the business and that all employees have access to relevant documentation. 

Management group

The company's CEO has an advisory forum, the management group, with the aim of ensuring that the company's operations are conducted in a sound and efficient manner. In its work, the management group shall always take into account the interests of the company and its customers. The management group shall normally meet when necessary, but at least every month. The CEO convenes and chairs the meetings, which shall have a standing agenda and shall be minuted.

Internal governance and control

Three lines of defense

Qred applies the principle of three lines of defense to define where in the organization responsibility for and control over the organization's risk-taking should be located. 

The first line of defense consists of the business operations, including the CEO, who is responsible for and controls the day-to-day risk management and compliance. The business operations are also responsible for performing controls of the processes that Qred applies, in the form of internal controls. 

The second line of defense consists of risk control functions and compliance functions that, among other things, monitor, control and report on Qred's risks and how the company complies with internal and external regulations. The control functions in the second line of defense are subordinate to the CEO and are primarily the CEO's independent control body, but report directly to both the Board and the CEO. 

The third line of defense consists of internal audit functions. Internal audit functions report directly to the Board of Directors and constitute the Board's independent control body. Through the third line of defense, the first and second lines of defense are reviewed and evaluated. 

Remuneration policy and remuneration system

Remuneration policy

Qred has a compensation policy ("Policy") whose purpose is to describe and establish principles for how the company's compensation system shall be designed, controlled and continuously followed up. The Policy shall be compatible with and promote effective risk management and counteract excessive risk-taking. Furthermore, the policy shall ensure that customers' interests are not adversely affected by the company's incentive structure. The remuneration system shall promote Qred's ability to attract and retain competent personnel and help to ensure that the company's long-term goals can be achieved.

The Board of Directors is ultimately responsible for the content, design, implementation and compliance of the compensation policy. The policy shall be regularly, at least annually, reviewed and, if necessary, updated before it is approved by the Board of Directors. A risk analysis shall form the basis for the Board's decision to adopt the policy. The Board of Directors shall further decide on:

  • Remuneration to the management team,
  • Remuneration to the control functions,
  • outcome and payment of any liquidated damages, as well as
  • measures to follow up the application of the policy.

Remuneration Committee

The Board has appointed a compensation committee. 

The Remuneration Committee is responsible for, at least annually, monitoring and evaluating the company's remuneration system and preparing decisions on remuneration issues for the Board's decision. In following up the remuneration system, the Remuneration Committee shall also monitor the development of inappropriate salary differences between women and men.

The board of directors shall, where applicable, comply with the remuneration decisions made by the annual general meeting. 

Risk analysis

The company shall conduct an annual risk analysis in order to identify employees whose duties have a significant impact on the company's risk profile. The analysis shall take into account all risks to which the company is or may be exposed, including the risks associated with this policy and the company's remuneration system. The analysis shall be documented and attached to this policy. The Remuneration Committee shall review the risk analysis before the policy is adopted by the Board of Directors.

Compensation system

General principles

The Company's remuneration system shall be designed in a way that is compatible with and promotes sound and effective risk management and prevents excessive risk-taking. The remuneration system shall encourage employees to perform well and help the Company to attract and retain competent employees. The remuneration system shall be applied in a gender-neutral manner.

Quick replacement

Fast pay

The basis for the company's compensation system is a fixed salary. The fixed salary is determined on a rolling basis, with the first revision usually taking place 12 months after the start of employment. As a general rule, salary revisions shall take place once a year.

Employees' fixed salary shall be determined on the basis of objective criteria and be market-based. In the event of new employment, the fixed salary shall be determined on the basis of the market situation for the corresponding profile and the value that the employee is expected to add to the Company. In subsequent salary reviews and in the event of a change of duties, an individual assessment shall form the basis for salary setting, based on parameters such as work performance, independence, initiative, responsibility and personal development. Discriminatory or other unjustified differences between employees' fixed salaries may not occur.

In connection with a salary review, the salary-setting manager shall conduct a development and salary discussion with the employee, in which the connection between work tasks, work results and performance in general, as well as salary development, is clarified to the employee.

Vacation entitlement is determined in accordance with applicable legislation and individually in connection with employment and salary review.

Liquidated damages

The Board of Directors decides on variable remuneration for the management team and employees whose duties have a significant impact on the company's risk profile. The CEO may decide whether other employees (outside the above-mentioned group) shall be entitled to receive variable remuneration.

The company applies a system of variable remuneration in the form of performance-based bonuses for the CEO, the management team and most functions and business units. Performance-based bonuses shall be designed in a manner that meets the criteria in this section and the Policy in general. The criteria for receiving variable remuneration shall be based on the Company's overall performance as well as the employee's individual performance and the performance of the business unit in which the employee works. 

The variable remuneration shall be based on:

  1. Achieved financial targets related to budget;
  2. Operational goals for the business; and/or
  3. Performance-based measures related to individual or group performance.

The results that form the basis for calculating variable compensation shall mainly be based on risk-adjusted profit measures. The company shall consider both current and future risks and, in its assessment, take into account the cost of the capital and liquidity required by the business. The company shall ensure that variable remuneration is based on long-term sustainable results by assessing the results in a multi-year perspective. 

Furthermore, the company's underlying economic cycle and business risks are taken into account when the variable remuneration is approved and paid.

When determining variable remuneration, the assessment of the employees' individual results and performance shall take into account both financial and non-financial factors. Among the non-financial factors, the Company shall consider compliance with internal rules, responsibility, customer satisfaction and safeguarding of customers' interests.

If the company's control functions for risk control, compliance and internal audit are employees of the company and are entitled to variable compensation, the company shall ensure that such compensation is determined on the basis of objectives linked to each control function, regardless of the performance of the business areas they review.

The company shall ensure that any variable remuneration does not affect the company's ability to maintain a sufficient capital base or to strengthen the capital base if necessary.

The company shall maintain a reasonable balance between employees' fixed and variable remuneration. Employees' fixed remuneration shall always be at a sufficiently high level for the variable part of the remuneration to be zero. The total variable remuneration received by employees may never be at a level that risks undermining the Company's capital base and ability to generate a positive result in the long term. The total variable remuneration to an employee shall never exceed 100% of the employee's annual fixed remuneration. The Company's sales function, which is fully decoupled from the Company's credit function and credit decisions, is exempt from the above limitation, but may never exceed SEK 100,000 per month in variable remuneration.

Guaranteed tangible compensation

As a general rule, the company shall not provide guaranteed variable remuneration to any employee. If there are special reasons, the Board of Directors may decide on guaranteed variable remuneration to an employee, but only in connection with new employment and only during the employee's first year of employment.

Electrical policies and conflicts of interest

Qred has prepared an ethics policy in order to ensure that the business is conducted in an ethically responsible and professional manner in line with Qred's internal and external rules. The purpose of this policy is also to promote transparency, integrity and a corporate culture that protects Qred's business against corruption. 

The policy establishes common standards to promote Qred's ethical approach and to assist employees in situations where applicable rules are missing or provide limited guidance.

Conflicts of interest

Qred has prepared a policy and instructions for handling conflicts of interest that may arise in the business. 

Qred's employees are expected to always act in Qred's best interest and exercise good judgment that is not influenced by private interests or divided loyalties. 

No employee may participate in the processing of a matter or make a credit decision concerning a related party, a related party's company or otherwise when there may be a risk of conflict of interest. Nor may an employee handle matters in which the employee has a personal interest or matters in which such an interest exists with a relative of the employee or with a company in which the employee or a relative of the employee has a material interest. In such a situation, the employee must be excluded from the credit granting and credit decision. 

Qred's employees shall not purchase goods or services from related parties without prior approval from the CEO, and the CEO shall not purchase goods or services from related parties without prior approval from the Board of Directors.