Welcome to the Novo Nordisk Annual General Meeting. I would like to hand over the word to our Chairman of the Board, Helje Lund, who is participating on web stream live from Oslo. Helje?
Thank you, Lars, and good afternoon and good morning to you on the Western Hemisphere and welcome to the 2020 Annual General Meeting of Novo Nordisk. I'm pleased to welcome all shareholders to this meeting. I'm calling in from Novo Nordisk offices in Norway and would like to start by thanking you all for making it possible for us to conduct the meeting even in this very unusual situation. The global crisis with coronavirus is impacting us all privately as well as professionally. Each impacted country goes through the coronavirus at different stages and in different manners.
We follow the situation closely and adhere to the local authorities' recommendations as circumstances change. For Novo Nordisk, we have 2 key priorities. We need to ensure that the safety and well-being of our employees around the world and we need to ensure our lifesaving medicines are available for the patients globally. In addition, we are doing everything we can to help authorities and international bodies respond to the coronavirus pandemic. This is also why we have encouraged our shareholders not to attend this general meeting in person.
Instead, the meeting is webcasted live in Danish and English to allow shareholders worldwide to follow the meeting. The resolutions of the meeting will be recorded in the minutes in English and translated into Danish And the minutes will be made available at our website within 2 weeks from today. 2019 seems a long time back, but I would like to take a minute to reflect on the year that has passed. Last year, we laid out our plans to reprioritize resources towards key growth areas, streamline operations and redefine our research and development strategy. The evidence of our strategic progress can be found in the acceleration of sales in the international operations, strong launch of Ozempic in North America, the return to growth in our biopharm business and the reinvigorated pipeline with great potential to offer treatment for unmet medical needs.
As a large company, Novo Nordisk has also large responsibilities. Society expects more from business to help solve challenges such as preventing the rise of type 2 diabetes and obesity and fighting climate change. So the balancing act between innovation along with improved health outcomes and access to affordable care has been and is a key topic for the Board. I believe our initiatives for enhancing access to care represent real progress towards addressing this dilemma. Our activities within prevention targeting obesity and diabetes add to this progress.
Also this last year, I've had the great privilege to visit our offices around the world, where I met employees at the front lines of our operations who shared with me how working for a company with a clear purpose multiweights them. I have one key takeaway from these interactions and discussions I've had with both Although the challenges facing Novo Nordisk are not going away, indeed in many instances they are more urgent than ever. We have put in place the building blocks for responding to these and other challenges. And the Board is confident that Novo Nordisk is well positioned to deliver on its purpose of defeating diabetes and other serious chronic diseases, while at the same time achieving profitable growth. Now I would like to present my fellow board colleagues, Jepi Kees Jensen, the Vice Chair, who is physically present at the Bela Centre in Denmark Brian Daniels, Lawrence De Bruu, Andreas Fiebig, Silvig Regard, Liz Hewitt, Kasim Kutayl and Martin McKay.
And the 4 employee elected members are Andre Marie Korneland, Mette Berjur Jensen, Thomas Randso and Stig Strobek. All of the directors are attending the meeting on the web. This brings me to the members of the executive management. Our CEO, Lars and our CFO, Carsten Knutsen are both physically present at the Vela center. And I would furthermore like to introduce the rest of the company's Executive Vice Presidents who are present at the web too.
Monique Carter, responsible for people and organization. Monik was appointed Executive Vice President in September 2019 after Lars Grehan resigned to pursue opportunities outside the company. Mike Dorsdau, responsible for international operations and based in Switzerland. Rudovic Helfgott, responsible for biopharm and based in Switzerland too. Ludovic joined Novo Nordisk in April 2019 following Jesper Bangor's retirement from the company.
Durblanga, North American operations based in the U. S. Kamila Silvesk, responsible for Commercial Strategy and Corporate Affairs Mats Klorgsgaard Thompson, Chief Science Officer, responsible for research and development and last but not least, Henrik Wirth, responsible for product supply, quality and IT. As mentioned during the course of 2019, 2 long tenured colleagues, Jesper Brangor and Lars Krejn left no one already. I want to take this opportunity to thank them both for their contributions to Novo Nordisk over many, many years.
I would also like to present the company's auditors from PricewaterhouseCoopers, Morgans Morgansons and Mats Melgar. And finally, I can inform you that the Board of Directors again this year has appointed attorney, Klaus Sergore, to act as Chair of the General Meeting. Claus is leading the meeting from the Bela Centre in Denmark. And with these words, I leave to Claus Sergore to take us through the agenda for this year's Annual General Meeting. Over to you, Claus.
Thank you very much. I'll do my best, and it will be easier this year than usually because there are no shareholders present in the room. So I am in the unusual situation that I can thank the shareholders for not showing up. My first job is to confirm that the general meeting is duly convened and competent to transact business. I can confirm that that is the case, but I'll just emphasize a few of the rules that follow from Danish law and from the articles of association of the company.
The most important of these rules is that the general meeting has to be called with a notice of between 3 5 weeks. It has to be posted on the website. It has to be announced through a company announcement, and it has to be sent separately by mail or by email to those shareholders who have specifically requested that. And that notice was sent out this way on the 21st February. Some of the items on the agenda today involves changes to the articles of association.
In that respect, it follows from the articles of association that it is necessary that at least twothree of the total number of votes is present here, and that is the case here. Even though we have few shareholders here, 85% of the capital and 85% of the vote is actually present here. With regard to the voting, the changes to the articles of association will require a twothree majority, whereas the other proposals just require simple majority. There is today 1 shareholder proposal on the agenda. Shareholders can ask to have an issue, a topic on the agenda if they do so at least 6 weeks prior to the general meeting, and there is one such proposal here under item 8.
With regard to attendance, well, I've already mentioned how few we actually are present here in Belasendal. 884 had originally signed up. And despite we are so few, as already mentioned, 85% of the total number of votes is actually represented here through proxy of written votes and 55% of the total capital is represented here. 2,875 shareholders have already voted by using the electronic possibilities, and I can mention now that a huge majority of the votes do support the recommendations of the Board. The exact numbers will be included as an attachment to the actual minutes of this meeting here that will be published within the next 2 weeks.
As usual, the first four items on the agenda will be presented together. The oral report and the review of the financial highlights will be presented by the CEO, Lars Voorgaard Jonsson followed then by the Chairman of the Board, Mr. Helje Loth. And first, I give the floor to Lars Voorko
Janssen.
Thank you, Helia, and thank you, Claus. And also a warm welcome from me to our shareholders here today. As we enter a new decade, Novo Nord stands strong. In 2019, we delivered a very solid financial result with both sales and operating profit growth of 6% measured at constant exchange rates. This performance reflects an accelerated growth in International Operations and the contribution from the launch of Ozempic, particularly in the U.
S. As well as cost focus on cost efficiencies. Three milestones stands out. In the U. S, we secured a major scientific achievement with the regulatory approval of Reberzos, the world's 1st and only GLP-one medicine in a tablet, and early feedback indicates promising prospects.
In January 2020, Ozempic was approved in the U. S. For the indication of reducing the risk of major adverse cardiovascular events in adults with type 2 diabetes and established cardiovascular disease. Lastly, Ozempic is now available in 30 countries and achieved blockbusters status within 18 months. Our key contribution to society and patients is to discover medicines and make these medicines accessible to patients all over the world.
Today, we have best in class products in all the therapy areas in which we are active. At the beginning of 2019, our global sales and marketing teams delivered no fewer than 87 successful launches, thereby delivering innovative treatments to people living with diabetes, obesity, hemophilia, and growth hormone disorders. It is likewise encouraging to note that our biopharm business has proven robust in an increasingly competitive environment. 1 of the greatest opportunities for Novo Nordisk is undoubtedly obesity care. We have already established a leading position in this field and expect to build on the success of Saxenda, which is now available in 46 countries.
All of these accomplishments demonstrate how we are indeed driving change to benefit patients and deliver convincing results. Results that are reflected in strong financial performance, not to mention achievement of our long not last to mention the achievement of our long term financial targets. Considering all of this, I'm very satisfied with how the company performed in 2019. Will now review some of the key developments in 2019, then provide you with some reflections on our priorities for 2020 and beyond. For many years, we have worked with long term financial targets to balance short and long term considerations.
With the performance in 2019, Novo Nordisk has met its long term financial targets. As we aim to reflect the broad growth aspects of Novo Nordisk across therapy areas and geographies, this historic approach is no longer sufficiently describing Novo Nordisk future growth outlook. Consequently, we introduced our strategic aspirations for 2025 at our Capital Markets Day in November 2019. The strategic aspirations consist of 4 dimensions with medium term goals to provide direction towards 2025. Purpose and sustainability, innovation and therapeutic focus, commercial execution and the 4th, financials.
We hold ourselves accountable for progress towards each and all of them. In the following, I will elaborate on how we do just that. In a world where serious chronic diseases not only have a significant impact on individuals' quality of life, but also hamper socioeconomic development and strained healthcare budgets, we recognize that medicines is not the only part of the solution. We consider it our responsibility to help challenge these help tackle these challenges. As such, Novo Nordisk aspires to be respected for adding value to society.
We are stepping up our efforts to provide broader access to our medicines for those who need them. In 2019, we reached 3% more patients globally and we expanded our access to insulin commitment with 29 middle income countries, bringing the total to 78 countries. Also within prevention, we have increased our efforts, exemplified by our new partnership with UNICEF on prevention of childhood overweight and obesity. In terms of our environmental responsibilities, we stepped up to the challenge and launched in early 2019 an ambitious new environmental strategy Circular for CERO. This will take us towards the ultimate ambition of ensuring 0 environmental impact from our activities.
It is our fundamental belief that our contribution to global health relies on our ability to develop radically new treatments and solutions, and we are well positioned to do this. We have raised the innovation bar for diabetes treatment, And I'll come back to some of the key 2019 clinical milestones such as insulin Icodec and Ameline in obesity a little later. For now, I just wanted to highlight the key regulatory milestones. As mentioned, in 2019, Rebecelsus was approved in the U. S.
As the 1st GLP-one in the tablet. And in early 2020, the U. S. FDA approved the inclusion of cardiovascular safety data in the label for Rebersos while granting Ozempic an indication of reducing the risk of major adverse cardiovascular events in the label. Also in early 2020, the European regulators recommended Rebelsus for approval.
Within biopharm, Esperoct was approved in the U. S, the EU and in Japan for the treatment of hemophilia A. I'll now take you through our 2019 sales performance in greater detail as well as the financial performance. In line with our aim of reaching a global value market share of more than a third of the diabetes market by 2025, we have expanded our global market leadership by 0.8 percentage point to 28.6 percent. Furthermore, we have an ambition of accelerating growth in International Operations, where we now aspire to grow annual sales by 6 percent to 10% until 2025.
In 2019, we saw 11% sales growth in International Operations. Meanwhile, we are transforming our U. S. Business and it is our aspiration that by 2022 around 70% of the U. S.
Sales will be coming from new products launched since 2015. The 1% sales growth in 2019 in North America operations needs to be seen in the light of this large undertaking. In 2019, sales grew by 6%, which was driven by both operational units. International Operations sales grew by 11% supported by growth across all regions driven by the underlying demographic developments as well as the utilization of our broad portfolio of innovative products via the market fit approach. North America Operations sales grew by 1%, supported by GLP-one, obesity and biopharm segments, partly countered by insulin sales declining in the U.
S. Global insulin sales declined by 4% in 2019 as the solid insulin sales growth in international operations is countered by lowered realized insulin prices in the 22% was driven by 19% growth in North America Operations, supported by the strong uptake of Ozempic and 32% sales growth in International Operations. Obesity sales increased by 42% with both operating units contributing to growth, driven by promotional activities and the continued rollout of Saxenda. Finally, biopharm sales increased by 4% driven by solid nordiotropin sales and the continued rollout of the portfolio of innovative hemophilia products such as Refixia, Desperoct as well as stable NOVA7 sales and a solid performance of NOVA8. In the U.
S, Novo Nordisk continues to expand its new to brand market leadership, which with the solid uptake of Ozempic and the launch of Rebelsus has reached 56%. Consequently, Novo Nordisk has regained total market leadership with a 47% market share in a market that is growing more than 30% in a volume year over year. Ozempic Reeds Blockbuster status within 18 months and total Ozempic sales were DKK11.2 billion in 2019. In the Q4 of 2019, Novo Nordisk initiated a focused launch of Rebezios in the U. S.
Initial feedback is encouraging. As of the start of 2020, we have secured around 30% combined market access for Wibeltos. GLP-one products are gaining foothold also outside of the U. S. The global GLP-one segment value share of the total diabetes market has increased by 4 percentage point to 18% over the past year.
Novo Nordisk is the global market leader with a market share of 47.5%. The global rollout of Ozempic continues and it has now been launched in 30 countries. Looking across the regions in International Operations, GLP-one sales are growing as indicated by GLP-one's share of growth, which was 35% in 2019. As promised earlier, I will now share a few key clinical milestones from 2019. We believe in continued innovation in diabetes, including within insulin.
We acknowledged the high innovation bar required, but at the same time, we see great unmet needs for patients when it comes to securing stable blood sugar. In early 2020, we saw encouraging Phase 2 data for insulin docodiq sorry, in INQUADEC, our long acting insulin intended for once weekly segment. And we expect to progress this into Phase 3. We have initiated several Phase 3 and outcome trials with semaglutide, 1 milligram and 2 milligram as well as orally administered semaglutide. We are testing semaglutide in a higher dose than Ozempic to cater for intensification needs.
We are evaluating semaglutide within retinopathy focus and chronic kidney disease flow. And lastly, we are running a large cardiovascular outcome trial for Rebecelsus called CHOAL. Our commitment to obesity care is also evident. We have initiated a Phase II trial with Amylin, and monotherapy and have gotten results from 2 Phase I PYY trials. We chose based on their respective half lives to discontinue PYY1562 for further evaluation while further evaluation is needed for PYY1875.
Lastly, a Phase 3 program for concizumab was initiated in hemophilia A and B irrespective of inhibitor status, which we unfortunately had to pause earlier this month. In addition to the EU and U. S. Filings of somapacitan, our once weekly growth hormone in the adult indication, we have initiated Phase III trials for somapacitan in children. This ends my review of key developments in 2019.
I encourage you to read our annual report where you'll find more details around our performance, and I invite you to also look at our company's performance from the holistic approach of our strategic aspirations. Let's take a look at what is in front of us. Reflecting on our strategic aspirations within all four dimensions, I just want to highlight a few milestones for 2020. In terms of sustainability initiatives, we have as of January 2020 expanded our U. S.
Affordability offerings to provide additional options for patients, and I want to stress that ensuring affordable care for patients is a key priority. Also while we are facing the coronavirus situation. Furthermore, as a result of the utilization of solar energy power across all U. S. Operations, we expect to have all production sites on 100% renewable power in 2020.
Turning to innovation. We expect a significant news flow during 2020. Within diabetes, we're looking forward to the Phase III results for high dose semaglutide and to initiate Phase III for insulin Icodec. For obesity, we expect the Phase III results for semaglutide in obesity in the Q2 of 2020, while Phase 2 results for the amylin compound is expected later in 2020. Within biopharm, we have initiated Phase III trial with MiMID, our bispecific antibody for subcutaneous prophylaxis treatment in people with hemophilia A.
For our growth hormone business, we have submitted somapacitan indication. We have set we have a set of strategic commercial aspirations, which entail capturing more than a third of the diabetes market, at least doubling our obesity sales and ensuring a sustained growth outlook for biopharm. For 2020, we expect to continue the global launch of key products such as Ozempic, Rybelsus, Saxenda, Esperoct, Brefixia in supporting the achievement of these aspirations. Finally, turning to financials, where Helio will elaborate more on the specific 2020 guidance in just a minute, I just want to highlight that we aspire to deliver solid sales and operating profit growth as well as drive operational efficiencies across the value chain, while safeguarding an attractive capital allocation for our shareholders. Before concluding, I just want to put a few words on what the outbreak of the coronavirus has been for Novo Nordisk in the past couple of months and how we currently assess the situation.
For Novo Nordisk, our key priorities are to safeguard the well-being of our employees and to secure the continued supply of lifesaving medicines to the millions of people around the world who rely on these each and every day. Furthermore, we support impacted societies through different measures. One example in Denmark being the donation of 20 tons ethanol to help bridge the gap on hand sanitizer shortage. We follow the situation closely and adhere to the local authorities' recommendations, and many employees are currently working from home. From a production point of view, we are ready for times like these and all manufacturing lines are currently in operation worldwide, ensuring continued supply of medicines globally.
We expect to conduct our ongoing clinical trials and no delays are expected in trials close to finalization. Out of respect for the current strain on the healthcare system, we will not start any new trials. Finally, it is important to say that most no noise products are used for chronic treatment. However, during a period of social distancing implemented in many markets, fewer new patients are temporarily expected to be initiated on treatment. In conclusion, we aim to be a truly sustainable business environmentally, socially, and financially.
From the very beginning, this is how we have built our business, staying true to the no noise way. I'm confident that we have a solid formula for delivering on our purpose, contributing to global sustainable growth and a sustaining commercial success. I'd like to thank you all for your support. We have now reached item 2 on the agenda, presentation and adoption of the statutory annual report. The annual report for 2019 was published electronically on the 5th February 2020, which included our financial results for 2019 and the outlook for 2020.
In 2019, sales grew by 6% at constant exchange rates. With our continued efforts within resource optimization, in addition to driving cost efficiencies across the organization, operating profit also grew by 6%. In terms of the functional lines, the production costs increased by 12% at constant exchange rates, resulting in a gross margin of 83.5%. Sales and distribution costs increased by 6% at constant exchange rates. This reflects the continued investment in growth markets and international operations as well as promotional activities for GLP-one and obesity products globally.
Research and development costs declined by 6% at constant exchange rates, driven by implementation of intangible assets, offset of the reversal of write downs of pre launch inventory for oral semaglutide. The underlying increase in R and D cost is driven by the many large Phase III trials with the semaglutide molecule in different indications. Administration cost increased by 1% at constant exchange rates. The positive impact from currencies on operating profit of 5 percentage points is countered by a loss of DKK3.9 billion on net financial items, driven by losses on foreign exchange hedging contracts relating mainly to the U. S.
Dollar. The effective tax rate for 2019 was 19.8%, which was positively impacted by non recurring changes to deferred tax assets following the Swiss tax reform. Furthermore, net profit increased by 1% and diluted earnings per share increased by 3%. Total assets increased by DKK 14,800,000,000 to DKK 125,600,000,000 from the end of 2018 to the end of 2019. The increase in total assets is primarily driven by the non current assets due to an increase in property, plant and equipment, primarily due to the ramp up of diabetes production investments in the U.
S, high investments in intangible assets and the impact from IFRS 16 adaptation. Free cash flow from free cash flow increased by 6% compared to 20.18 to DKK34.5 billion. The increase primarily reflects increased cash from operating activities driven by the timing of rebate payments in the U. S. This concludes the presentation of the income statement and balance sheets.
Helje will now describe the proposed capital allocation to the shareholders for 2019. Over to you, Helje.
Thank you so much, Lars. Novo Nordisk made good progress in 2019, and our teams have delivered profitable growth, and we delivered on our financial guidance and important strategic milestones we achieved, including the launch of Rivexis, the world's first oral GLP-one. And just 18 months after the successful launch, Ozempic reached blockbuster status in 2019. These are important innovations to improve healthcare and for providing growth and returns for the owners of Novo Nordisk. In 2019, the dividend payout ratio was 15.5%, which is in line with our pharma peer group.
Furthermore, Novo Nordisk has for many years bought back shares to return cash to shareholders, which has resulted in a 2% reduction of the share capital every year since 2015. The proposed total dividend for 2019 will be elaborated upon later in this presentation. I will close with a few words about what to expect in 2020. The financial outlook for 2020 is stated on the slide. Sales growth is expected in the range of 3% to 6% measured at constant exchange rates.
This reflects expectations of robust performance for the GLP-one based products for diabetes and obesity care. The portfolio of new generation insulin and the contribution from biopharm products. The guidance also accounts for intensifying competition within diabetes, care and hemophilia. Furthermore, continued pricing pressure within diabetes as well as the expansion of our affordability initiatives, especially in the U. S, are expected to impact sales.
Operating profit growth is expected to be in the range of 1% to 5% measured at constant exchange rates, reflecting the sales outlook as well as continued focus on resource allocation. Reported sales growth and operating profit growth are each expected to be around 1 percentage point higher than at the constant exchange rate. We maintain the financial outlook for 2020 as communicated on the 5th February 2020. This is based on a number of assumptions in relation to impacts of the coronavirus, including that patient flows will normalize in the beginning of second half of twenty twenty. Further update on the impact will be provided in connection with the release of the financial results for the 1st 3 months of 2020 on the 6th May 2020.
This brings me to the item 3 of the agenda, remuneration. Firstly, I would like to present the remuneration report for 2019. Previously, the remuneration was reported in the annual reports, but due to new legal requirements and to further enhance transparency, we have prepared a separate remuneration report describing Board and executive remuneration. Next year, the remuneration report will be submitted to the Annual General Meeting for an advisory vote. The remuneration report for 2019 is quite comprehensive and includes a description of key developments in remuneration in the financial year, the actual remuneration of Board members and executives, remuneration benchmarks and shareholdings by Board members and executives.
And let me give a description of the remuneration of executives for 2019. Our remuneration principles approved by the Annual General Meeting provide the framework for the remuneration of executives. And in 2019, the remuneration of the executives did not deviate from the remuneration principles. Remuneration packages for executives comprise a base salary, a short term cash based incentive, a long term share based incentive and a pension contribution and other benefits. For 2019, the total CEO remuneration amounts to DKK54.8 million.
That is 33% up compared to 2018. 51% of the remuneration has been paid out as salary and bonus, while 49% linked to pension and shared incentive is deferred to a potential later payout. The reason behind the significant decrease is, 1st of all, the excellent performance by Novo Nordisk last year, resulting in the incentives paying out in the high end. The cash bonus and share incentives vary from year to year depending on performance. That is the intention.
So reward is higher for higher performance and payout is less than performance is more challenged. And 2019 was a good year for Novo Nordisk. Secondly, Lars Reimann Raisin has been subject to a phase in since his appointment as he developed and progressed in his role as CEO. This phase in is now complete. We acknowledge that the CEO pay in Novo Nordisk is highly in a Danish context, and the Board is spending considerable time in finding the balance between social acceptance and the need to have competitive remuneration to be able to compete for talent in a tough international talent market.
And even if remuneration of Lower Nordisk executives is in the high end compared to other large Nordic general industry companies, it is significantly lower than that of our European peers in the pharmaceutical industry. In conclusion, I find the total remuneration of the Novo Nordisk CEO as well as the other executives to be at the right level, taking the good business results and the relevant remuneration levels into considerations. This brings me to the agenda item 3.2, approval of the actual board remuneration for 2019, followed by the item 32B, the remuneration level for 2020. The board remuneration consists of a fixed annual base fee, a multiplier of the fixed base fee for the chairmanship and members of the Board committees, fees for the ad hoc task and a travel allowance as showed on this slide. At the Annual General Meeting in March 2019, it was decided to keep the annual base fee for board members unchanged at DKK700,000.
The actual remuneration for the members of the board for 2019 amounted to DKK19.4 million and corresponds to the remuneration level approved by the Annual General Meeting in March last year. You can see the breakdown of this amount in the remuneration report. The board remuneration has been implemented in accordance with our remuneration principles as approved by the Annual General Meeting. On this background, I proposed to the general meeting to adopt the actual remuneration for 2019. As regards to remuneration level for 2020, the board remuneration was most recently increased in 2018.
The board proposes to adjust the remuneration level in line with general salary inflation since 2018 and thus increased remuneration by 2.9%. Thus, the board proposes that the base fee leverage of 220 1,000 for 2020 be approved by the Annual General Meeting. In addition, the Board proposes that the travel allowance is similarly adjusted in line with the salary inflation. The proposed remuneration level is as shown on the slide behind me. I propose that the general meeting adopts this remuneration level for 2020.
This brings me to the adoption of the remuneration policy. As mentioned at the annual general meeting last year, the Board undertook a general review of the executive remuneration. In addition, it has been necessary to revise the current remuneration principles to comply with the amended regulatory framework. When revising the policy, the board has taken into account input received from shareholders in a comprehensive consultation process. The Board has found that overall value of the current remuneration package for executives is in general considered appropriate and consequently the intention with the introduction of a new policy is not to change the current level.
However, the board has assessed that it was advisable to introduce a number of adjustments of the remuneration components. These changes include an alignment of the pension plan contribution with those that apply to other employees, a longer term incentive plan period and a simplification of the targets in the short term and long term incentive plans. The proposed policy is a continuation of the previous remuneration principles. As such, the remuneration policy is still designed to attract, retain and motivate the board members and the executives at a competitive level. Remuneration is designed to align the interest of the executives with those of the shareholders.
The fixed remuneration enables the executives to take decisions with a long term perspective in mind without undue considerations for short or long term incentives. The variable remuneration is designed to promote performance in line with the company strategy and to further align the interest of executives and shareholders. The changes by which the remuneration package remains weighted to fixed rather than variable pay elements allow us to recognize our Scandinavian heritage and acknowledge that as a company, we have a contract to society where we do not want a remuneration package that could be seen as having an excessive upside. The remuneration will be compared annually to benchmarks of Nordic General Industry Companies and European Pharma Companies only. The executives continue to receive a base salary to be adjusted given the change in pension contribution.
The pension contribution for executives will be reduced to the same level that apply to other employees. The short term incentive program will be calculated based on base salary only and redesigned to allow for a higher degree of incentives being linked to the company's overall performance. The long term incentive program will be calculated based on base salary only and redesigned from a 4 year program period consisting of a 1 year performance period with financial and multiple non financial targets and a 3 year vesting period with a sales target to a 5 year program period consisting of a 3 year performance period with fewer targets and a subsequent 2 year holding period. For the Board, the remuneration is a continuation of current remuneration with no substantive changes. The changes to the remuneration included in the proposed remuneration policy will, if adopted, apply to the Board remuneration for 2020 and going forward, whereas the changes to the executive remuneration will apply for the 2020 remuneration and going forward.
This brings me to the amendments to the articles of association. If the proposed remuneration policy is adopted, the reference to the current remuneration principles in Article 14 of the articles of association will be deleted and subsequent articles will be renumbered accordingly. As from next year, the remuneration report will be submitted for an advice revote at the Annual General Meeting in accordance with the new requirements in the Danish Companies Act. Consequently, the board has proposed that the standard agenda in Article 7(two) of the articles of association is amended to reflect this requirement. This brings me to item 4 on the agenda, resolution to distribute profit.
In August 2019, Novo Nordisk paid an interim dividend of DKK3 per share. The Board proposes that the final dividend for 2019 be DKK5.35 per share to be paid in March 2020. The total dividend for 2019 is then DKK 8.35 per share. The total dividend increased by 3% compared to 2018, corresponding to a payout ratio of 50.5%. No dividend will be paid on the company's holding of own shares.
Moreover, the Board of Directors approved a new share rep repurchase program of up to DKK17 1,000,000,000 to be executed over the course of 12 months starting February 2020. The total program may be reduced in size in case of a significant bolt on acquisition during 2020. And then back to you, Claus.
Thank you very much, and I will briefly summarize here. This was the presentation of the first four items on the agenda. And the first one was the oral report, which was then, of course, taken note of as nobody has the ability here to comment on it. The second one was the annual accounts, which have been approved. Under 3, we have separate items.
The first one was the presentation of the remuneration report, which is not a voting item and will not be a voting item in the future, but will be presented. The next one is 3.2, where we have the remuneration, which was elaborated on. It's a final approval of the remuneration for 2019, which was preapproved last year, which has now been approved finally, unchanged compared to the preapproval last year. And we have 32B, which is the pre approval of the year level of the remuneration for the Board for 2020 that has been approved. And 33 is the remuneration policy, which was described in details just before by the Chairman.
3.4 was the change of the standard agenda to take care of the changes with regard to the remuneration report from next year. And 4 was the presentation of the proposal for payment of dividend, where there was a proposal for paying 5 point DKK35 in addition to the DKK3 which have already been paid out previously. So all these items have now been finalized, and that brings us to item number 5 on the agenda. Item number 5 is election of members to the Board of Directors, including Chairman and Vice Chairman. The rules following from the articles of association are that the Board elected by the general meeting must consist of between 4 10 members.
Presently, it consists of 9 members. And as you will hear soon, the proposal is to have reelection of the existing Board. Besides this, it follows directly from the articles of association that it's up to the general meeting to appoint the Chairman and to appoint the Vice Chairman. Finally, I'll mention upfront that it is considered to be good corporate governance to reflect on the results of the Board's self evaluation before the election of the actual Board members today. So I'll give the floor back to Helje Lund.
Thank you, Claus. Let me say a few words on the collaboration among the board members. We conduct a self evaluation every year to see how we then perform as a team. And the self evaluation includes all members of the Board of Directors as well as that of the executive management. In addition, each individual member of the Board and executive management is provided with feedback from all other Board members and executives on their individual performance.
In 2019, the self evaluation was facilitated internally and concluded that the Board had the right items on the agenda, worked well together and had a good and open collaboration with the executive management team. The process also reinforced continued focus on the implementation of the research and development strategy on commercial execution as well as on being a sustainable company also for the future. Back to you, Claus.
Thank you. And that brings us to the actual election of the year board. And for all the year candidates to the board, I can refer to the information on other functions, which were included in the notice for this general meeting here. And the first proposal is that Mr. Heliolod is reelected as Chairman of the Board.
And as there are no other candidates, I can congratulate you with another year, Helene. The next one is the election of the vice chair and where the proposal from the Board is that J. P. Kristiansen should be reelected. And again here, as we have no other candidates, I can conclude that Ibe Kristiansen, who is present here in the room, has been reelected for another year.
Congratulations. Then we have the ordinary board members where there are presently 7, and they are suggested to be reelected. And the 7 are Brian Daniels, Laurence Debrault and Andreas Phibic, Sylvie Gregoire, Liz Hewitt, Kassim Coutay and Martin McKay. And also here, no other candidates, so I congratulate you all being present on the web right now with another year for the company. Besides the members being company.
They were elected in 2018, and they are elected for a 4 year period. And that were made by Jenssen, Annemarie Kvaernerlein, Thomas Randhzhau and Stig Stolberg. That brings us to item 6 on the agenda, the appointment of the auditors of the company. The audit committee has recommended the election of PwC to be elected here by the general meeting, and that is the proposal from the Board of Directors. The Audit Committee has based their recommendation upon the significant knowledge of the pharmaceutical industry and the exhaustive knowledge of Novo Nordisk, which PwC has.
And as it follows from the new legislation, it has to be mentioned in this respect here that the audit committee has not been influenced by 3rd parties nor subjected to any clause of contract with a 3rd party restricting the annual general meeting's choice to certain auditors or audit firms. The companies, in general, have the obligation to rotate auditors. They can only be auditors for the same company for a certain period, and the board has initiated a process for selecting a new candidate to be proposed for the Annual General Meeting next year, and they have already done that in order to secure a smooth process. The audit committee has evaluated 3 different auditors in the selection procedure and has submitted recommendations to the Board to propose the appointment of Deloitte, states how to share a revision partner sales case as new auditors at the general meeting next year, not this year. So this is purely information for the shareholders.
The recommendation is free from influence as mentioned before. The Board has decided to follow this recommendation and plans to propose the appointment of Deloitte at the Annual General Meeting in 2021. And in order to ensure a smooth transition, Deloitte will function as a shadow auditor up until the proposed appointment in 2021. However, it's important to remember that this is not something being decided today. This is something that will be presented for the general meeting to decide next year.
So as there are no other candidates, I can conclude that PwC has been elected for 1 more year and probably just for 1 more year based on what I was just saying. That brings us to item number 7, which is proposals from the Board of Directors. And there are certain of these proposals which will influence the articles of association. And as mentioned at the start of this meeting, that requires a quorum of 2 thirds of the votes, and that is here as we have 85% present. Besides that, it has to be approved with a 2 thirds majority not only of the votes but also of the year capital.
The rest can be here decided with a simple majority. And I can confirm here upfront that everything will be approved because we know that the votes, which we already have, exceed these thresholds substantially. And as mentioned before, the final numbers will be seen from the attachment to the minutes of this meeting here today. The first of the items is 7.1, reduction of the share capital. And as mentioned by the year Chairman, the company has had a tradition through the last at least 5 years to reduce the year's share capital each year with about 2%.
And here, the reduction proposal is €10,000,000 nominal value. Those shares have been bought for a value of approximately €17,000,000,000 So it's treasury stock being canceled. And in accordance with the law, these shares, which are already bought and paid for, they will that will be notified to the creditors with a 4 week notice that follows by the law, and the actual reduction of the shared capital will then more or less automatically take place 4 weeks from now. I consider that to be approved. 7.2 is the authorization to repurchase own shares.
That is also a standard authorization the company asked for. Basically, all companies ask for every year. And Novo Nordisk has the tradition of asking for it every year, so it's up to the shareholders to decide. The law allows an authorization to be granted for up to 5 years. It is the standard authorization up to 10% with a 10% holding limit.
And with regard to the price, a maximum deviation from the quoted price is 10%, and I consider that to be granted. 7.3% is authorization to the Board of Directors to increase the share capital. That is a more technical thing. That is the same as with the treasury stock to extend it every year, so it runs for another year and also to make sure that it is equal to 10% of the year existing share capital. And as the share capital is being reduced, the authorization the board asked for is also being reduced.
So the board asked for a prolongation until the end of almost the end of March 2021. And besides that, that the amount is €2,000,000 for the first one and €47,000,000 for the other two ones, and I consider that to be granted. Item 74 is approval of donation to the World Diabetes Foundation. That is a slight change to a donation, which was originally given by the general meeting in 2,002 and reissued in 2,008 and in 2014, and it is thoroughly described in the notice for the general meeting. So I'll just here conclude that it has been approved and granted.
That was the end of the year proposals from the Board of Directors. And as I mentioned initially, it is possible for shareholders to get items on the agenda. And 1 shareholder, Mr. Frank Ohn, has timely forwarded a proposal to be decided on today, and that is included in item 8. The shareholder proposes that Novo Nordisk going forward in the annual report should disclose a ratio between the Chief Executive Officer's remuneration as well as the executive management's average remuneration and the remuneration of an average employee as well as the median remuneration.
And as Mr. Van Goghen, who would normally be up here to reason his proposal, has complied with the suggestions from the government not to show up to meetings. He does not have the opportunity to comment on it here, but I think that it follows from the notice to the meeting. And I'll just briefly give the word to Helmut to comment on the proposal.
Thank you, Claus. We appreciate the interest in Novo Nordisk shown by Mr. Rohan. However, the board does not support the proposal. Novo Nordisk remuneration report provides detailed information on executive remuneration, including the ratio between Chief Executive Officer and the employee's remuneration during the past 5 years.
It is the Board's opinion that no further information is needed to be included in the annual report. So back to you, Claus.
Thank you. And I can mention that about 85% of the total votes of the company are present here and have voted before the general meeting. And out of those, 0.34% of the votes have voted in favor of the year proposal from Mr. Frank Oren. So I can conclude that the proposal has not been approved and the actual numbers will follow from the Exhibit to the Year minutes of this meeting here, which, as I said before, will be published within the next 2 weeks in accordance with the law.
That brings us to item number 9, any other business. That is an item where it is possible to get the word, but it's not possible to decide anything. And as there is nobody here, I will hand back the floor to the Chairman, Vasco Heljell Lund.
Thank you, Claus. And before this meeting comes to an end, I would like remind you all that we intend to solely publish investor relevant information electronically in the future as part of our ambition to reduce our environmental footprint. Therefore, I encourage you to sign up to receive investor relevant material such as the AGM notification for the Annual General Meeting in 2021 by e mail. This can be done through our homepage. This has certainly been a very different general meeting than previous years, And I would like to thank all the shareholders joining us online today.
Meeting shareholders at the Annual General Meeting is important to Novo Nordisk, and we're therefore all looking forward to meeting you in the spring of 2021. Until then, please stay safe. I would also like to thank the shareholder meeting for guiding us through this general meeting too, and I hereby declare that the general meeting is closed. Thank you.