The Tasks of the Board of Directors

Lundbeck’s Board of Directors is responsible for approving the corporate strategy, setting goals for Executive Management, and for ensuring that members of Executive Management and other senior managers have the right qualifications. The Board of Directors also evaluates management performance and management remuneration. Furthermore, the Board of Directors has the overall responsibility for ensuring that adequate procedures for risk management and internal controls are in place, and for addressing any relevant key risks. This responsibility is defined in the Danish Companies Act and stipulated in the rules of procedures for the Board of Directors. The Board of Directors regularly evaluates the business, our financial strategies and policies, and ensures that day-to-day management is carried out in accordance with such policies. 
 
Executive Management reports to the Board of Directors on an ongoing basis regarding:

• Follow-up on approved strategic activities and key risks, including risks associated with patenting, research and development (R&D), regulatory, commercial and financial issues
  
• Recommendation for approval of large-scale investments and transactions which are of an unusual nature or size for Lundbeck
• Financial reporting, including follow-up on budgets, estimates, interim financial statements and annual reports
• Matters such as internal controls in the financial reporting procedures, special financial and accounting issues, evaluation of financial reporting and other financial information
• Processing of final audit book comments from the independent auditors
• Feedback from investor meetings to provide shareholders’ view on Lundbeck

In 2022, the focus of the Board of Directors was to secure continued implementation of the corporate strategy, review internal pipeline, ensure that the Executive Management performs day-to-day management in accordance with the Company's Articles of Association, including preparing strategies, plans and budgets.

Lundbeck’s Board of Directors consists of eight external directors elected by the shareholders at the Annual General Meeting, and four members elected by our Danish employees.

Members elected at the Annual General Meeting are up for re-election every year, while the members elected by our employees are up for re-election every four years. In 2023, Lars Rasmussen was re-elected as Chair and Lene Skole re-elected as Deputy Chair.   

Lundbeck promotes and encourages equal opportunities and diversity. In terms of the 2023 Board composition and gender, the Board of Directors consists of eight male representatives and four females: two female Board members elected by the shareholders and two elected by Lundbeck’s employees. By 2026 Lundbeck is committed to achieve representation of ~40% of each gender in Board of Directors, elected at the Annual General Meeting.

Lundbeck has a two-tier Board structure consisting of the Board of Directors and Executive Management. No Board member is a member of Lundbeck’s Executive Management. Nasdaq Copenhagen recommends that at least half of a company’s Board members should be independent. The issue of Board member independence is particularly relevant for Lundbeck, which has a single principal shareholder, the Lundbeck Foundation, holding 70% of the shares. Five of the eight Board members elected at the Annual General Meeting are independent, while three members, due to their close affiliation with the Lundbeck Foundation, are not. The Lundbeck Foundation does not nominate the Chair of Lundbeck’s Board of Directors, but only recommends members for the position of deputy Chair and two ordinary Board members.

Every year, Lundbeck’s Board of Directors and Executive Management conduct a self-evaluation to assess strengths and weaknesses of the work performed by the Board and the committees. Based on the outcome, changes to the Board of Directors’ working procedures are discussed and any proposals for improvement are considered. 

The 2022 Board evaluation was conducted by an external vendor. This evaluation was an in-depth assessment where the Board of Directors and Executive Management answered a questionnaire and were interviewed individually. Process description and the result showed an increase to an already high level of satisfaction with the collaboration and interaction between the Board of Directors and Executive Management. The collaboration was described as transparent, constructive, effective, and involving.

The survey also included an update of the competencies on the Board of Directors. We saw an increase of competencies and knowledge relevant for the future strategic path of Lundbeck, e.g., scientific knowledge and experience, which is now at an even more satisfactory level.

The general procedure for the evaluation of the Board of Directors can be found here.

The procedure for selection and nomination of Board candidates can be found here.

The Board of Directors analyses the company’s need for capital on an ongoing basis, including an assessment of the company’s capital structure. 

There is no universal answer to the question of what the optimum capital structure is for a specific company because the relationship between equity and interest-bearing debt relies on the specific characteristics that apply within the particular industry in which the business operates and, by extension, the operating and financial risk. However, companies in the pharmaceutical industry are often particularly well-funded which may be explained by the extended development projects and risks associated with research activities.

The Board of Directors pursues the policy that equity beyond the level which, based on a conservative estimate, would be considered sufficient to support the underlying business should be distributed to the shareholders. The distribution to our shareholders takes place through annual dividends and if appropriate share buyback programs.

The Chair and Deputy Chair ensure that the Board of Directors’ tasks and responsibilities are handled in a balanced and satisfactory manner. In addition to activities related to strategic, financial and operational supervision of Executive Management. In March 2016, the Board of Directors elected Lars Søren Rasmussen as Chair and Lene Skole-Sørensen as Deputy Chair, and they have annually been re-elected at the Annual General Meetings since then. 

The Board of Directors has set up three advisory committees: The Audit Committee, the Remuneration & Nomination Committee, and the Scientific Committee. The three committees advise the Board on financial information and reporting, the company’s remuneration and nomination strategy including remuneration of Executive Management, and R&D, respectively. The Chair of the Board of Directors is not the Chair of the Audit Committee. 

The Audit Committee provides advice to the Board of Directors on internal and external controls in financial reporting procedures, special financial and accounting issues, evaluation of financial reporting and other financial information and risk management issues. 

The Audit Committee provides advice on the basis of:

• Meetings with the Corporate Management Group and internal and independent auditors
• Management’s recommendation concerning accounting policies, accounting estimates, new accounting standards and significant single transactions
• Critical guidelines and policies for internal controls and financial reporting procedures
• Annual strategy, audit plans and review of status on audit procedures performed by Internal Audit
• Communication from independent auditors to the Board of Directors, including monitoring and control of auditors’ independence, review of audit planning and draft audit book comments
• Systematic review of the company’s risk exposure
• Cases received through the whistle-blower system

In March 2023, the Board of Directors re-elected Dorothea Wenzel as Chair and re-elected Lars Søren Rasmussen and Lars Erik Holmqvist as members of the Audit Committee. The Chair of the Board does not act as Chair of the Audit Committee and more than half of the members are independent. 

The charter for the Audit Committee can be found here.

The Remuneration & Nomination Committee informs the Board of Directors of remuneration and nomination decisions regarding members of Executive Management. The Committee also advises on the company’s overall remuneration policy and prepares the remuneration report. Additionally, the Committee handles assignments related to recruitment and appointments to Lundbeck’s Board of Directors and to the senior management, and annually assesses the composition and results of the Board, the Executive Management and the Committees. 

In March 2023, the members of the Remuneration & Nomination Committee were re-elected and includes Lars Søren Rasmussen as Chair and Lene Skole-Sørensen and Jefferey Berkowitz as members. More than half of the members in the Remuneration & Nomination Committee are independent. 

The Remuneration & Nomination Committee Terms of Reference can be found here.

Lundbeck’s Board of Directors has a Scientific Committee, the purpose of which is to advise the Board of Directors on support for strategic research and development. 

In March 2023, the Board of Directors re-elected Jeremy Max Levin as Chair and Lene Skole-Sørensen, Jeffrey Berkowitz, Santiago Arroyo and Jakob Riis as members of the Scientific Committee.

The charter for the Scientific Committee can be found here.