The Novo Nordisk Foundation is a Danish commercial foundation that operates independently of any other interests than those described in the Foundation’s objects.
The Foundation is governed by the Danish Foundation Act, and the Danish Business Authority therefore supervises the Foundation.
In addition, the Novo Nordisk Foundation is covered by the Recommendations on Foundation Governance of the Committee on Good Foundation Governance.
The object of the Novo Nordisk Foundation is:
- to provide a stable basis for the commercial and research activities of Novo Nordisk A/S, which is engaged in research, development and production within and sale of pharmaceuticals and related products and services; of Novozymes A/S, which is engaged in carrying out research, development, production and trade within biological solutions; and of any future public or private limited companies in which the Foundation’s subsidiary, Novo Holdings A/S, may hold a material equity interest or over which Novo Holdings A/S may have material influence, whether through proxy or otherwise;
- to support physiological, endocrinological, metabolic and other medical research:
- to support research hospital activities within diabetes in Denmark; and furthermore
- to support other scientific, humanitarian and social purposes.
Board of Directors
The Foundation is governed by a Board of Directors consisting of a total of nine members, of which six members are elected under the Articles of Association and three are employee-elected Board members.
The Board members elected under the Articles of Association (of which two must have a medical or scientific background) are elected by the members elected under the Articles of Association for one year at a time and may be re-elected. The Board has prepared a competence profile describing the preferred competencies for members of the Board. The competence profile is available through the menu on the left.
For the purpose of safeguarding the Foundation’s commercial and grant-giving objectives it is expedient that two of the members elected under the Articles of Association have experience from Novo Group companies, that two have insight into medical or natural science, and that two have commercial insight but are independent of the Novo Group.
Further, the Foundation aims to have at least one member of a non-Danish nationality and at least two members of each sex elected under the Articles of Association before 2019.
The Board elects among its members a Chairman and a Deputy Chairman at the ordinary board meeting in March, who constitute the Chairmanship and who plan the board meetings. In June 2018, the Board elected Lars Rebien Sørensen as Chairman and Marianne Philip as Deputy Chairman
The Board has established a Nomination Committee comprising two or more members elected by and among the Board members. One Committee member is appointed as Chair. In June 2018, the Board elected Lars Rebien Sørensen as Chair of the Nomination Committee and Lars Munch as a member. The Nomination Committee assists the Board by reviewing the competence profile for members of the Board, nominating candidates for election to the Board and assessing the candidates Novo Holdings A/S nominates for election as members of the Board of Directors of Novo Holdings A/S.
Based on the competence profile, the Nomination Committee presents to the Board nominations related to the current Board members elected under the Articles of Association and nominations for candidates for new Board members elected under the Articles of Association. The ordinary election of Board members takes place at an ordinary board meeting in March each year. The Articles of Association stipulate that Board members must resign at the end of their electoral period but can be re-elected until they reach the age of 70 years.
In addition, the Board includes three employee representatives elected by and among the employees of the subsidiaries of the Foundation in accordance with Danish law. Employee-elected Board members serve for a 4-year term and have the same rights, duties and responsibilities as Board members elected under the Articles of Association.
- approves the overall strategy for the Foundation;
- awards all grants and decides a framework for other grants in which a committee identifies the recipient;
- supervises the commercial activities of Novo Holdings A/S, including the companies in the Novo Group, and approves, among other things, the financial strategy for the Foundation and Novo Holdings A/S, the investment strategy for Novo Holdings A/S and major investments planned by Novo Holdings A/S;
- supervises the performance of the Foundation and the Executive Management; and
- ensures that the Foundation is properly organized.
The Board decides which grant areas the Foundation will support and establishes specialist committees comprising experts of high international calibre. The Foundation also draws on external international experts. This structure ensures that every applicant awarded a grant from the Foundation has been subjected to comprehensive peer review, thereby guaranteeing that the application is assessed on its quality, potential and viability and on the merits of the applicant’s qualifications before the Foundation decides to award a grant.
The Board decides the rules of procedure, and every year it decides on the framework for the committees’ work, including their specific grant instruments and the amount of money allocated for these.
The committee members are elected for a period of up to four years, with the possibility of being reappointed for an additional term of up to two years. The total number of years as Chair and member of the same committee, however, cannot exceed 10 years.
The Board holds at least four ordinary board meetings each year and a number of additional meetings discussing more strategic issues.
The Board determines and approves the Board members’ remuneration for the preceding financial year at an ordinary board meeting in March where the Board approves the Annual Report for the Novo Nordisk Foundation. The Foundation’s remuneration policy is that the Board members receive a reasonable base fee for their work on the Board. The Chairman of the Board receives 3 times the base fee, the Deputy Chairman receives twice the base fee and the other members receive 1 times the base fee. In addition, the Chair of the Nomination Committee receives 0.5 times the base fee, and the other member of the Nomination Committee receives 0.25 times the base fee. Finally, the two Board members elected under the Articles of Association with a medical or scientific background receive remuneration for work as members of the Foundation’s specialist committees, as determined by the Board, in addition to their remuneration as Board members.
In March 2018, the Board of Directors of the Foundation approved that the base fee in 2018 will be DKK 300,000, the Deputy Chairman’s remuneration will be DKK 600,000, the Chairman’s remuneration will be DKK 900,000, the remuneration for the Chair of the Nomination Committee will be DKK 150,000 and the remuneration for the other member of the Nomination Committee will be DKK 75,000.
Each year, the Board evaluates its work and the collaboration between the Board and the Executive Management to identify areas for improvement. The Chairmanship facilitates this evaluation.
The Board’s rules of procedure lay down the framework for the work of the Board and are evaluated regularly to ensure that they reflect the activities of the Foundation at all times.
The Board has decided who may and shall speak on behalf of the Foundation to the public and on which matters. The Chairman speaks on behalf of the Board and about the Foundation’s corporate interests. The Executive Management speaks on behalf of the Foundation about the grant policies and strategies decided by the Board and on all operational issues related to the Foundation’s work. Senior employees may, following usual coordination with the Executive Management, speak about matters within their field of expertise, including on grants and publications.
The Foundation has established a corporate social responsibility policy that covers the Foundation’s grant-awarding activities.
The Executive Management carry out the day-to-day management of the Foundation and is responsible for all operational matters related to the Foundation and for implementing the policies and strategies adopted by the Board of Directors.
The Board approves the employment of the Executive Management based on the recommendation of the Chairmanship. The Chairmanship evaluates the performance of the Executive Management.
The Executive Management consists of CEO Birgitte Nauntofte and deputy CEO Niels Peder Nielsen.
The accounts of the Foundation are audited by a state-authorized public accountant appointed by the Board based on recommendation by the Chairmanship. An auditor is elected each year at the ordinary board meeting in March that also approves the Novo Nordisk Foundation Group accounts.
In March 2018, PricewaterhouseCoopers was re-elected as the Foundation’s auditor for a 1-year period.
Recommendations on foundation governance
In accordance with Danish law, The Committee on Good Foundation Governance has prepared a set of recommendations, Recommendations on Foundation Governance, which the foundations with corporate interests must address and in their annual report explain if they do not comply with the recommendations (the “comply or explain” principle).
In March 2018 the Board determined that the Novo Nordisk Foundation follows all recommendations except the recommendation on the election period for board members. The Committee recommends that board members be elected for a minimum period of two years and a maximum period of four years. In 2004, the Foundation’s Board of Directors decided, with the approval of the public authorities, to change the election period for members elected under the Articles of Association from three years to one year. The Board assesses that an election period of one year better allows for coordinating the succession in the boards of the whole Novo Nordisk Foundation Group: that is, in the operating companies, in the Foundation’s committees and in the Board of the Foundation.
The menu on the left provides an overview of how the Foundation complies with the individual recommendations.
In 1999, the Novo Nordisk Foundation established a wholly owned subsidiary, Novo Holdings A/S (called Novo A/S in 1999 but changed to Novo Holdings A/S in 2017), through a contribution-in-kind in the subsidiary of a share of the Foundation’s bond portfolio. All A and B shares in Novo Nordisk A/S previously held by the Foundation were transferred to Novo Holdings A/S on 31 December 1999. In November 2000, Novo Nordisk A/S was demerged into two continuing companies, Novo Nordisk A/S and Novozymes A/S.
At the end of 2017, Novo Holdings A/S held about 28.1% of the share capital in Novo Nordisk A/S and 75.5% of the votes in Novo Nordisk A/S. Similarly, Novo Holdings A/S held 25.5% of the share capital in Novozymes A/S and 71.2% of the votes in Novozymes A/S. These figures do not include the holdings of their own shares of Novo Nordisk A/S and Novozymes A/S.
The Foundation’s shares in Novo Holdings A/S are non-negotiable instruments and are prohibited from being sold as long as the Foundation exists. By exercising the Foundation’s voting rights in Novo Holdings A/S, the Foundation’s Board is obligated at all times:
- to hinder any capital increase in Novo Holdings A/S by which the Foundation would lose its majority of votes in Novo Holdings A/S;
- to hinder any sale by Novo Holdings A/S of A shares in Novo Nordisk A/S and/or Novozymes A/S; and
- to ensure that all decisions made in Novo Holdings A/S comply with and respect the provisions of the Foundation’s Articles of Association.
The Board is obligated to ensure reasonable consolidation of the Foundation through suitable appropriation of funds, possibly in Novo Holdings A/S, among other things, to enable the Foundation to participate at the discretion of the Board, possibly through Novo Holdings A/S, in future capital increases of Novo Nordisk A/S and Novozymes A/S and thus maintain the controlling interest in these companies.
To the extent deemed necessary by the Board to uphold and develop the commercial and research activities of Novo Nordisk A/S and Novozymes A/S as internationally competitive companies, the Foundation, in connection with a capital increase in Novo Nordisk A/S and/or Novozymes A/S or in connection with, for example, a merger of these companies with other companies, may waive its controlling interest in Novo Nordisk A/S and/or Novozymes A/S. Nevertheless, the Foundation is obligated to strive to maintain material influence in Novo Nordisk A/S and/or Novozymes A/S through Novo Holdings A/S.
Objects of Novo Holdings A/S
The objects of Novo Holdings A/S are to administer the bonds contributed to Novo Holdings A/S by the Novo Nordisk Foundation and to administer and exercise its voting rights on Novo Holdings A/S’ A and B shares in Novo Nordisk A/S and Novozymes A/S and, through this, to ensure that the Novo Nordisk Foundation receives a satisfactory financial return.
These objects are to be achieved through Novo Holdings A/S’:
- ensuring that all companies in which the company has a material influence actively contribute to the development of the Novo Group and operate their business in accordance with the visions and values of the Novo Group;
- maintaining a material influence in Novo Nordisk A/S and Novozymes A/S;
- complying with the rules and principles laid down in the Articles of Association of the Novo Nordisk Foundation regarding exercise of the voting rights of A and B shares in Novo Nordisk A/S and Novozymes A/S, respectively; and
- investment and financial activities, including placing of capital in companies and in real property in Denmark and elsewhere.
The Board of Directors of Novo Holdings A/S carries out and is responsible for all operational and strategic matters in relation to such investment activities.
Exercise of ownership and voting policies
Since Novo Holdings A/S is a wholly owned subsidiary of the Novo Nordisk Foundation, the Board of Directors of the Novo Nordisk Foundation actually constitutes the annual general meeting of Novo Holdings A/S.
According to the Foundation’s Articles of Association, the Board of Directors of the Foundation must strive to have members of the Board elected as members of the Board of Directors of Novo Holdings A/S. As part of the competence profile established for its Board, the Foundation strives to always have its Chairman and an additional member of the Board elected as members of the Board of Novo Holdings A/S.
The Boards of Directors of Novo Holdings A/S, Novo Nordisk A/S and Novozymes A/S, respectively, are responsible for and carry out all operational and strategic matters in relation to Novo Holdings A/S, Novo Nordisk A/S and Novozymes A/S.
How do we carry out our ownership of Novo Nordisk A/S and Novozymes A/S?
The following is a short summary. Read the full version here: Engaged Ownership
According to the bylaws of the Novo Nordisk Foundation (“the Foundation”), the Foundation must provide a stable basis for the commercial and research activities of Novo Nordisk A/S and Novozymes A/S. In order to fulfil this objective, the Foundation must maintain a majority of the votes in the form of A shares in both companies. In addition to this, it has been decided that the Foundation should hold at least 25.5% of the two companies’ share capital. The Foundation has given its fully owned subsidiary Novo Holdings A/S mandate to act on its behalf in carrying out the long-term ownership of Novo Nordisk A/S and Novozymes A/S.
The basis for the Foundation’s ownership of Novo Nordisk A/S and Novozymes A/S is that the two companies are governed by independent and qualified boards of directors, thus ensuring an arm’s length relationship between the Foundation and the two companies.
As shareholder with a majority of the votes in both companies, the Foundation is particularly mindful of observing and respecting the rights of other shareholders.
As a permanent owner of Novo Nordisk A/S and Novozymes A/S, the Foundation has formulated several long-term objectives concerning its ownership. The objectives reflect that Novo Nordisk A/S and Novozymes A/S must be global leaders in their respective fields with distinct commercial and research activities. Thus, through its ownership the Foundation seeks, among other things, to support the companies in:
- realizing a shared vision to contribute positively to the lives of people and the sustainability of society;
- providing engaging and inspiring working environments;
- generating competitive long-term financial results; and
- living up to the Novo Charter.
The Foundation emphasizes being a responsible, relevant and capable owner, thereby helping to secure the financial capacity of the companies and supporting societal developments that will benefit Novo Nordisk A/S and Novozymes A/S as well as the rest of society. This has concrete implications for the Foundation, for instance in relation to our capital reserves and policies.
Several times a year, the Foundation’s chairmanship holds meetings with the chairs of Novo Nordisk A/S and Novozymes A/S, respectively. In addition to this, its executive management meets with the managements of Novo Nordisk A/S and Novozymes A/S.
Through its ownership, the Foundation supports Novo Nordisk A/S and Novozymes A/S in appointing chairs who are independent of the Foundation and in having a majority of independent members on their boards. Following the annual general meeting, the boards of Novo Nordisk A/S and Novozymes A/S appoint the chairmanships from their own groups of candidates.
The Foundation nominates two members for each of the boards in Novo Nordisk A/S and Novozymes A/S. One of the appointees selected by the Foundation can be nominated as vice chair. In addition, the Foundation works towards having representation on the boards’ nomination and remuneration committees. The Board of the Foundation refers to the principles for remuneration of board members and executive managements in Novo Nordisk A/S and Novozymes A/S.
Read the full version here: Engaged Ownership
19 February 2020