THE Lundbeck Foundation wish to run a transparent operation. This is reflected in our governance structure and our approach to investments and grants.
Industrial foundations play an important role in the Danish society. With substantial contributions to Danish research and ownership of some of the largest Danish corporations, industrial foundations have considerable influence on the social and economic development in Denmark. In our view, such influence comes with a high level of responsibility: to ensure transparent operations and conduct our business with integrity.
At Lundbeck Foundation, we set high standards for good governance. We fully support the new Danish Industrial Foundations Act, effective as of 1 January 2015, as well as the issued recommendation on corporate governance for industrial foundations. We already meet most of the recommendations and aim to follow the best practice recommendations – in certain areas, we set the bar even higher.
Tasks and responsibilities
Lundbeck Foundation is managed by a Board of Trustees. The Board’s primary responsibilities are to:
The Board of Trustees meets a minimum of four times a year for board meetings and holds an annual seminar to review, discuss and refine the Foundation’s strategy.
The Board has set up research and investment committees, which meet regularly to analyse and discuss grant and investment issues in greater detail.
Composition and election
The Board consists of ten members; seven members are elected according to the statutes and three are employee-elected representatives appointed by the employees in the subsidiaries. The Board is composed in such a way that the combined knowledge and expertise of its members ensures the fulfilment of the Foundation’s objectives, as specified in the statutes.
The recommended election period for board members is 2-4 years. We have chosen to be more stringent. The board members elected according to the statutes are elected for a term of one year at a time. This is to allow for regular evaluation of their performance. However, board members elected by the employees in the subsidiaries are elected for a term of four years, in accordance with statutory regulations.
No member who has been a member of the Board of Trustees for more than 12 years – or who has turned 75 years of age – can be elected or re-elected to the Board. The Board of Trustees may deviate from this rule if they wish to retain a board member due to his or her particular competencies.
The Board of Trustees is a self-perpetuating entity that elects new members in accordance with the Foundation’s statutes. Ordinary election of members takes place at the Annual Meeting. It is the Chairman and Vice Chairman who nominate new members to the Foundation’s Board of Trustees. External search and selection advisors are usually called in to assist with this, to make sure the right candidates are found.
The Board performs self-assessments facilitated by a third party. They include a review of the strengths and weaknesses of the Board’s work, an assessment to establish whether statutory requirements have been met, and an evaluation of the collaboration between the Board and the Foundation’s executive management.
Active involvement in subsidaries
As owners, we are actively involved in all our subsidiaries. We monitor their performance closely and seek to act as a value-creating partner for their executive management and boards. We exert our influence through board selection and representation on the companies’ Boards and at their General Meetings. The CEO of the Foundation normally sits on the subsidiaries’ Board of Directors, typically in the role of Vice Chairman, as one of the Foundation’s two representatives. The Chairman of the Foundation, however, is not a member of the subsidiaries’ Board of Directors.
The members of the Board of Trustees are remunerated by a fixed fee that does not depend on the financial results of the subsidiaries nor on our investment portfolio or venture investments. Members of the research and investment committee as well as board members in our subsidiaries receive an additional fee in proportion to their workload. The remuneration of each member is specified in our Annual Report.
Lundbeck Foundation has a policy for external communications outlining who can make public statements on behalf of the Foundation and regarding which subjects.
The Foundation’s CEO outlines the overall framework and objectives for the external communication work and make statements on behalf of the Foundation. This responsibility can be delegated to the Director of Communication or relevant members of the management team. All media inquiries to the Board are referred to the Chairman.
Transparency on tax
Lundbeck Foundation is a responsible tax payer. We work to minimize tax risks and to be transparent in our policy on tax. In 2014, we adopted a new tax policy based on four basic principles:
Please use the link to see our complete tax policy.
As one of our objectives is to support research, we distribute part of our taxable income through our grant activities. The effect of our grant activities on income tax can be explained through a simple example:
Taxable income before grants
Deduction for consolidation (25%)
Taxable income after grants
Income tax (current tax rate)
Our whistleblowing scheme provides our employees, employ- ees in our subsidiaries and people related to the Foundation with the option of confidentially reporting wrongdoing. The whistleblowing reporting function is accessed via the Foundation’s website.
Code of conduct for grants
We have a code of conduct in place regarding grants, and rules governing the access of board members, employees and third parties to Foundation grants. Members of the Board of Trustees may not receive grants from the Foundation.
The full version of our Code of Conduct is available on our website.
The basic criteria for our allocation of research funds are that the scientific content of the application, the qualifications of the applicant, and the academic environment at the host institution are of a high international standard, and that the proposed research may eventually make a difference to people’s health and quality of life. We seek to ensure consistent and equal assessment of all applications. Consequently, we aim to have all applications peer reviewed by a group of experts, of which the majority are independent of the Foundation. For the assessment of regular project applications, we have set up two permanent evaluation committees with a majority of external and international experts. For the assessment of larger personal and strategic applications, we set up ad hoc evaluation panels with international experts. The members of both types of panels must all adhere to the Foundation’s rules on members’ disqualification.
All expert assessments lead to a recommendation to the Board of Trustees that makes the final allocation of grants in accordance with statutory requirements. Assessment procedures for applications and recommendations are adjusted on an ongoing basis, to accommodate the developments and implementation of new initiatives.
Code of Conduct for Good Research Practice
In 2014, the Board of Trustees adopted Lundbeck Foundation’s Code of Good Research Practice. This document supports basic principles of good research, i.e. honesty, transparency and accountability. All grant holders must sign this document before any research funds can be disbursed. By doing so, they declare that they will comply with these codes at all times. The Lundbeck Foundation’s Code of Good Research Practice also refers to the new national Code of Conduct for Research Integrity of 2014 by the Danish Ministry of Higher Education and Science.
AT LUNDBECK Foundation, we wish to ensure a reasonable balance between value creation and risk exposure. Our goal is to achieve long-term, stable returns at a moderate risk.
Risk assessment is an important part of business procedures at Lundbeck Foundation. We perform risk management across the entire Group and systematically monitor risks in all our subsidiaries and investment areas, to make sure we respond fast to changing circumstances.
The most important risks relate to the business risks of our subsidiaries and investments. However, for an industrial foun- dation, reputation is also an important part of risk manage- ment. That is why we pay close attention to good governance, setting high standards for the way we do business.
Risk related to our subsidiaries
Risks include business and financial risks associated with the operations of our subsidiaries, Lundbeck, ALK, and Falck. We believe that such risks are most effectively managed decentrally. Consequently, the management of the individual subsidiaries define their own risk management policies and procedures.
As owner and member of the Board of Directors of each subsidiary, we monitor business performance in the subsidiaries closely, and report back to the Foundation’s Board of Trustees on a monthly basis on all business and risk-related issues.
Risks related to portfolio Investments
We manage the market, credit and currency risks related to our portfolio investments by limiting maximum exposure to individual asset classes and underlying assets. The Board lays down the investment policy. To manage interest rate risk, we define limits for the duration of bond investments. Derivative financial instruments such as swaps, options and forward contracts are used for risk management purposes. The investment policy governs the use of such instruments with regard to maturity, quantity and counter-party requirements as well our venture investments.
Weekly portfolio performance reports are prepared for the CEO, and monthly detailed reporting is prepared for the Board.
CSR is integral to our way of doing business. Our activities in this field are guided by a keen understanding of stakeholder expectations and a clear commitment to making a positive impact on the societies we operate in.
As an international player with various grant and investment activities, Lundbeck Foundation Group has significant societal influence. We want to honour the responsibilities that follow from this and be recognised as a trustworthy group that sets high standards for transparency, commitment and integrity.
The Foundation is committed to the UN Global Compact, whose 10 principles set out the general framework for our approach to corporate social responsibility. These principles guide our policies, corporate strategies and guidelines for:
• corporate governance
• grant-making activities
• ownership of Lundbeck, ALK and Falck
• portfolio investments and other investments
We oppose any form of corruption, including extortion and bribery. Furthermore, we follow the UN guidelines laid down for labour and environmental principles, human rights and sustainable development.
Lundbeck Foundation’s values and policies are shared across the entire Lundbeck Foundation Group. The specific CSR policies and codes of conduct for the subsidiaries are laid down by their respective Boards of Directors, in which the Foundation is represented. Our representatives make sure that policies for CSR, including human rights and impact on climate, are enforced. Values and policies are adapted to meet the circumstances in which each of the subsidiaries operates.
For more information about Lundbeck, ALK and Falck’s approach to CSR, please visit their websites or annual reports.
Our approach to CSR is also reflected in our approach to allocation of grants, commercial investments, and our championing of gender equality and diversity in the workplace.
Support to independent research
The Foundation allocates substantial funds to independent research for the benefit of the society and to help improve people’s health and quality of life. In 2014, we awarded grants worth DKK 474 million. To make sure grant recipients comply with the conditions specified for the individual grants, we review their status reports and hold status meetings with all significant grant recipients. Furthermore, all grant holders must sign our Code of Conduct for Good Research Practice.
Our investment policy states that the Foundation is not allowed to make investments in enterprises presumed to act unethically. Nor are we allowed to invest in companies presumed to violate any of the 10 principles set out in the UN Global Compact. We regularly review our investment portfolios to make sure that major investments comply with the policy. The reviews conducted in 2014 revealed no instances of unethical conduct or violation among our investments.
Gender equality and diversity
Lundbeck Foundation supports gender equality and diversity and aims to have both genders represented on the Board of Lundbeck Foundation and on the Boards of its subsidiaries. Our ambition sat in 2012 to have at least two members of each gender represented on these Boards has already been reached.
In 2014, a male member of the Foundation’s Board of Trustees was replaced by a woman; the Board now counts two women and five men (not including employee representatives). At management level, three out of six are women.