GOVERNANCE

The Lundbeck Foundation aims to conduct its business with transparency and integrity. This intent is underpinned by a clear governance structure and is further reflected in the Foundation’s approach to investments and grants.

Enterprise foundations play an important role in Danish society. With ownership of some of the largest Danish corporations and substantial contributions to Danish research, enterprise foundations can influence social and economic development in Denmark. For the Lundbeck Foundation, such influence comes with responsibility.

The Foundation is committed to transparency and has high standards of governance. Consequently, it seeks to comply with two sets of principles, which are issued by two Danish governance committees. Firstly, The Committee on Foundation Governance, which issues recommendations for the governance of enterprise foundations. Secondly, the Danish Committee on Corporate Governance, which are used to guide listed companies in Denmark. As an enterprise foundation and the majority owner of two listed companies, both sets of recommendations are relevant, and are used as guiding principles by the Foundation.

The Foundation follows the recommendations issued by The Committee on Foundation Governance, with two exceptions:

■ Board members’ serving period: In the Foundation, Board members serve for one year. In this case, the Foundation has decided to follow the rules issued by The Danish Committee on Corporate Governance instead of the rules issued by The Committee on Foundation Governance, which recommends a serving period of two to four years.

■ CEO bonus model: The Board of Directors has decided to use a bonus model in the remuneration of the CEO. This bonus model is based on several elements, including the financial results of the subsidiaries and the Foundation’s financial investment activities. The bonus elements are determined to ensure alignment between the CEO’s remuneration and the long-term development of the Foundation, which comprises a very broad range of commercial and philanthropic activities.

For a full overview of the Foundation’s compliance with the Recommendations on Foundation Governance cf. section 77a of the Financial Statements Act, please use the following link: (https://www.lundbeckfonden.com/en/foundationgovernanc e).

The Foundation follows the recommendations issued by The Danish Committee on Corporate Governance where relevant, with three exceptions:

■ CSR policy : The Foundation does not have a policy for corporate social responsibility but its priorities are shared in the annual Sustainability report, which is available on the Foundation’s website.

■ Diversity policy : The Foundation does not have a diversity policy, but its priorities are shared in the annual Sustainability report, which is available on the Foundation’s website.

The Lundbeck Foundation’s governance principles

Compliance

 As an enterprise foundation, the Foundation strives to comply with two sets of recommendations on governance:

1) Recommendations on Foundation Governance and

2) Recommendations on Corporate Governance.

 Where the Foundation does not comply with these sets of recommendations, this is explained and stated explicitly

Independence

 The Foundation is headed by the Board of Directors. Seven Board members, including the Chair, are independent. Four Board members are elected by employees in the subsidiaries

 Former executives of the Foundation and its subsidiaries cannot be appointed to the Foundation’s Board of Directors

 Only one Board member, and the Foundation’s CEO, can hold board memberships in a subsidiary of the Foundation

 The Foundation’s Chair cannot hold board membership positions in the Foundation’s subsidiaries

Transparency

 The Foundation publishes its annual accounts in alignment with listed companies

 All key policies and governance documents are made public on the Foundation’s website

 Major decisions on philanthropic grants are communicated proactively via the website, social media and the media

Checks and balances

 The Foundation’s organisation and key processes are designed to prevent the concentration of decision-making power

 The majority of all grant-making decisions are subject to external reviews by international experts to ensure appropriate quality levels are met

■ A udit Committee and internal audit function : As an independent Foundation with no shareholders, financial information is only shared in the Annual report, but is complemented by its subsidiaries, which share information on a quarterly basis. Further, the Foundation has chosen not to have an audit committee or internal audit function.

For a full overview of the Foundation’s compliance with the Recommendations on Corporate Governance, please use the following link: (https://www.lundbeckfonden.com/en/corporategovernance)

The principles of the Foundation’s corporate governance can be summarised in:

■ Compliance

■ Independence

■ Transparency

■ Checks and balances

The Foundation’s governance principles are described more fully on the Foundation’s website and in the box on the previous page.

The Board Of Directors

The Lundbeck Foundation is managed by a Board of Directors in collaboration with the CEO. The Board members are presented on pages 40-42.

The Board’s primary responsibilities are to:

■ Decide the Foundation’s strategy

■ Make decisions of major significance or of an exceptional nature

■ Make final decisions on the allocation of grants

■ Supervise the organisation to ensure the Foundation is managed appropriately, in accordance with applicable laws and the Foundation’s statutes

■ Approve the Foundation’s policies for investments, communication, remuneration etc.

■ Appoint the Foundation’s CEO

The Board of Directors meets a minimum of four times each year and holds an annual seminar to review, discuss and refine the strategy.

BOARD MEMBER’S SATTENDANCE AT MEETINGS IN 2022

Steffen Kragh, Chair of the Foundation and Lundbeckfond Invest A/S and member of the Investment Committee

Peter Schütze, Deputy Chair of the Foundation and Lundbeckfond Invest A/S and member of the Investment Committee

Gunhild Waldemar, Chair of the Research Committee

Lars Holmqvist, Chair of the Investment Committee

Michael Kjær, member of the Research Committee

Susanne Krüger Kjær, member of the Research Committee

Svend Andersen, member of the Investment Committee

Henrik Sindal Jensen, employee representative from H. Lundbeck A/S, from 22 March 2022 4/4

Katja Barnkob, employee representative from ALK-Abelló A/S, from 22 March 2022 4/4

Mikkel Helmer Nielsen, employee representative from Falck A/S , from 22 March 2022 4/4

Morten Egholm Aagaard, employee representative from Falck A/S, from 22 March 2022 3/4

Ludovic Tranholm Otterbein, employee representative from H. Lundbeck A/S stepped down on 22 March 2022 3/3

Vagn Flink Møller Pedersen, employee representative from Falck A/S stepped down on 22 March 2022 2/3

Kristian Funding Andersen, employee representative from ALK-Abelló A/S, from 30 June 2021 to 22 March 2022 3/3

The Board has set up a Research and Prize Committee and an Investment Committee. Both committees meet regularly to analyse and discuss issues related to grants and prizes and to discuss investments in greater detail, respectively.

Active Involvement In Subsidiaries

As the majority shareholder, the Foundation is closely involved with each of the three subsidiaries; Lundbeck, ALK and Falck, monitoring their performances and, as a long-term owner, seeking to add value to the companies and their executive management teams and boards. The Foundation exerts its influence through board appointments and representation on the companies’ boards, and at their general meetings. The CEO of the Lundbeck Foundation sits on the boards of all three subsidiaries in the role of Deputy Chair and is one of the Foundation’s two representatives on each company’s board.

As stated previously, the Foundation has a strong focus on good governance and independence of board members. Please see page 35 for a full description.

Grant Governance

The basic criteria for the allocation of research funding are the scientific content of the application, the qualifications of the applicant, and the academic environment at the host institution, all of which must be of a high international standard.

The Lundbeck Foundation seeks to ensure the consistent and equal assessment of all applications. Consequently, all significant applications must be peer reviewed by experts. In addition to the Research and Prize Committee, the Board of Directors has established the Selection Committee to oversee The Brain Prize – as well as four permanent evaluation panels: the Grants and Prizes Panel, the Talent Panel, the Internationalisation Panel and the Scientific Enrichment Panel. Please see page 39 for information about the committees and panels.

Furthermore, ad hoc evaluation panels with international experts are established, as required, to assess personal and strategic applications. The members of the committees and panels must comply with the Foundation’s impartiality rules.

The Research and Prize Committee and the Grants and Prizes Panel report to the Board of Directors. The Selection Committee for The Brain Prize reports to the Board of Directors through the Research and Prize Committee, to ensure that its recommendations comply with the provisions for The Brain Prize.

The Board of Directors decides on the allocation of grants in accordance with statutory requirements. However, the Foundation has developed a model, which has been approved by the Danish Business Authority, whereby the Board, as part of its decision-making on the allocation of grants, can issue a grant mandate to a panel, formed by the Board, to implement the Board’s grant decisions.

The following panels allocate grants under a grant mandate:

■ The Talent Panel evaluates LF Postdocs, LF Clinical Postdocs, LF Ascending Investigators and LF Experiments

■ The Internationalisation Panel evaluates scientific meetings and conferences, visiting professorships and senior researcher sabbaticals

The Board of Directors has also issued a grant mandate to the CEO to implement the Board’s decisions on Frontier Grants.

In general, assessment procedures for applications and recommendations are adjusted on an ongoing basis to accommodate the development and implementation of new initiatives.

Distribution Of Responsibility

The Senior Vice President, Grants & Prizes, Director of Science, is responsible for managing day-to-day operations in the Grants & Prizes department.

The Board of Directors approves all of the Foundation’s prizes before they are awarded.

Investment Governance

Although it maintains overall responsibility for the Foundation’s investments, the Board of Directors has established an Investment Committee and appoints four committee members from among its members.

The committee is responsible for preparing decisions and recommendations for consideration and approval by the Board of Directors, and for ensuring that the Board of Directors is informed of all material matters.

Supervision of the Foundation’s investment activities is delegated to the Investment Committee in accordance with the investment policy, which is described in the Risk Management section on page 28.

The Investment Committee meets at least four times a year, or as required by special circumstances.

Policies

Each year, the Board of Directors discusses and approves a number of policies which are a vital part of the framework for the Foundation’s activities.

Please find the Foundation’s policies at the Foundation’s website: https://www.lundbeckfonden.com/en/policies