The following areas are usually reviewed at each board meeting:
- Minutes of the previous meeting
- CEO’s status report
- Report by CFO
- Strategic matters
- Feedback from latest auditing committee meeting
- Financial reporting, such as interim report and annual report
- Decisions on particular matters
During 2017 CEO Karl-Johan Persson provided information on the following, among other things: sales, costs, results, the customer offering for each brand and market performance, investments, store and online expansion, sustainability, external factors and development opportunities. The CEO also provided ongoing information on purchasing, production, the stock-in-trade, marketing and PR activities, organisational changes, the broadening of the product range, new initiatives and the development of new brands. In 2017, 388 new stores net were opened with Kazakhstan, Colombia, Iceland, Vietnam and Georgia as new H&M store markets for 2017. Decisions taken by the board during the year included a rapid online expansion, with eight new H&M online markets in 2017: Turkey, Taiwan, Hong Kong, Macau, Singapore, Malaysia, the Philippines and Cyprus.
The industry is undergoing interesting structural changes and rapid shifts in technology as a result of the increased digitalisation of society. This creates great opportunities, but also puts demands on the organisation. The board therefore discusses the significance of this shift, with more and more shopping taking place online, and the transformation that the H&M group is undergoing in order to respond to these changed circumstances. Among other things, it discusses future growth plans, how the organisation should adapt to the new situation and which investments need to be made in order to be able to offer customers a shopping experience that is as complete and seamless as possible. The board receives ongoing updates on these projects. These might concern development of the online offering in terms of faster delivery options, mobile payment solutions, handling of returns, changes of platforms, advanced data analytics etc. The long-term investments being made aim to ensure the group’s future expansion and position.
The group’s integrated sustainability work is very important and is discussed regularly by the board. Every six months, the head of sustainability provides an update on the group’s sustainability work with reference to key indicators and targets, such as compliance with the Code of Conduct, sustainable materials, climate impact, anti-corruption, etc.
At each board meeting the chairman of the auditing committee reports to the board on what the auditing committee discussed at its latest meeting. This primarily concerns areas such as accounting, auditing, tax, customs duties, internal control, risk, various new regulations and new legislation etc. The overall risk assessment, involving the very largest risks – in both the short and the long term – is then also discussed at subsequent board meetings. At four of the year’s meetings the board goes through quarterly reports before they are published and at the January meeting the board discusses the annual report, with the auditor also reporting on the year’s audit.
During the year the board takes various decisions, for example regarding the expansion and investment plan, the proposed dividend, which was SEK 9.75 per share for the 2016 financial year, as proposed to the 2017 AGM, the payment of the dividend in two instalments during the year, guidelines for remuneration of senior executives and the financial reports etc.
At the board meeting held on 30 January 2018 the board of directors decided that the growth target of the H&M group to increase sales in local currencies by 10–15 percent per year with continued high profitability is a long-term target. In view of the H&M group’s transition work to face the major shift in the industry, the company does not expect the growth target to be reached in 2018.
During the board meeting in January 2018 the board of directors decided to propose to the annual general meeting on 8 May 2018 an unchanged dividend of SEK 9.75 (9.75) per share. The board notified that it intended to investigate the possibility of offering all shareholders an opportunity, but not an obligation, to reinvest the dividend received in newly-issued H&M shares in what is known as a Dividend Reinvestment Plan (DRIP). However, the investigation showed that the reinvestment plan would be difficult to implement, both from a technical perspective and because of time constraints, and consequently in mid-February the board of directors decided not to proceed further with the Dividend Reinvestment Plan idea and instead decided to propose to the annual general meeting on 8 May 2018 an unchanged cash dividend of SEK 9.75, to be paid in two instalments – one in the spring and one in the autumn.
Since H&M does not have a separate review function (internal audit) for work on internal control, but has instead established its own model for managing the company’s risk and internal control (see the annual report 2017), once a year the board assesses the need for a separate internal audit function. This year the board again reached the conclusion that the present model for monitoring internal control is working in a satisfactory way.
Before the 2017 annual general meeting the board carried out an assessment of the application of the guidelines for remuneration to senior executives that were adopted by the 2016 AGM. The results of this assessment were published on the website in good time before the 2017 AGM.
H&M has no remuneration committee, since the board of directors deems it more appropriate for the entire board to carry out the tasks of a remuneration committee. It is the board that prepares the proposed guidelines for remuneration to senior executives that are presented at the AGMs, and it is the board that decides on the CEO’s salary in accordance with the guidelines adopted at the last AGM. The board continually assesses the CEO’s work and once a year discusses this matter separately in conjunction with the setting of the CEO’s remuneration for the coming year. No member of executive management is present when this is discussed.