Corporate Governance
EXEL CORPORATE GOVERNANCE PRINCIPLES
Exel plc (“Exel or the “Company”), the parent company of Exel Group, is a Finnish public limited company. Exel’s registered office is in
Applicable laws and regulations
Exel's corporate governance complies with the Finnish Companies Act, the legislation covering the securities markets and other official regulations related to the governance of public joint stock companies. The principles set out here complement the applicable legislation.
Furthermore, Exel complies with Corporate Governance Recommendation for Listed Companies published jointly by the Helsinki Stock Exchange, the Central Chamber of Commerce of Finland and the Confederation of Finnish Industries EK, which entered into force on 1 July 2004 (Corporate Governance Recommendation) with the exception relating to the Board Committees. Explanations for the deviations from the Corporate Governance Recommendation are provided in connection with relevant subject hereafter.
The administrative bodies of Exel plc are the General Meeting, the Board of Directors and the President and CEO. The Management Group assists the President and CEO in the operative management of the company.
General Meetings
The highest decision-making power in the company is exercised by shareholders at General Meetings (GM) convened by Exel’s Board of Directors. These meetings consist of Annual General Meetings and, if necessary, Extraordinary General Meetings. The General Meetings shall be held either in Mäntyharju,
The Annual General Meeting (AGM) will be held on a date before the end of June, as determined by the Board. The AGM shall consider matters presented for its attention in the Articles of Association, including approving the financial statements, deciding on the distribution of dividends, amending the Articles of Association and electing the members of the Board of Directors and the auditors. The AGM also confirms the remuneration paid to members of the Board as well as handles other proposals made to the General Meeting.
When considered necessary, an Extraordinary General Meeting is convened to handle a specific proposal made to a General Meeting.
Usually, a General Meeting handles the matters placed on the agenda by the Board of Directors. According to the Finnish Companies Act, a shareholder may, however, present a written request to the Company’s Board of Directors to place a matter on the agenda of the next General Meeting. If a shareholder, or shareholders, holding a minimum of 10 per cent of all shares, or the Company’s auditor, request in writing for the handling of a specified matter at a General Meeting, the Board of Directors shall without delay convene an Extraordinary General Meeting to handle the requested matter.
Advance information
The GM invitation is published no earlier than two months and no later than 17 days before the GM, in newspapers designated by the Board.
Candidates for the Board of Directors proposed for election by the Shareholders’ Nomination Committee are disclosed in the AGM invitation or in another way before the AGM, provided that the candidates have given their consent for their election. In addition, other candidates proposed to the Board who are supported by at least 10 per cent of the holders of the shares of the Company and who have given their consent for their election, shall be disclosed in the AGM invitation. The candidates proposed after the delivery of the AGM invitation are disclosed separately. In addition, the proposal for the election of the external auditor proposed by the Audit Committee or by a majority shareholder is disclosed in the AGM invitation.
The Board’s proposals to the General Meeting, as well as the required financial information will be available for the shareholders at least one week prior to the General Meeting on the Company’s website.
Attendance of shareholders
Shareholders must notify the company of their intention to attend the AGM at the latest on the day given in the notice of the AGM, which may be no earlier than ten days before the meeting.
Attendance of the members of the Board and the President and CEO
The Company’s aim is that all members of the Board of Directors and the President and CEO attend the General Meetings unless there are well-founded reasons for their absence. Furthermore, the Company’s aim is that person proposed for the first time as the member of the Board attends the General meeting that decides on his/her election unless there are well-founded reasons for the absence.
Decision making
Exel has only one class of shares. In the General Meeting, all shares carry equal voting rights. The Articles of Association of Exel have no redemption clauses. The Company is not aware of any shareholder agreements concerning either the ownership of the Company's shares or the exercise of the associated voting rights.
Shareholders’ Nomination Committee
When needed, the General Meeting can resolve to appoint a Nomination Committee to prepare proposals concerning Board members for the following Annual General Meeting. The Nomination Committee comprises the Chairman of the Board and the persons selected by the four largest shareholders (as of the shareholder register situation on 1 November preceding the Annual General Meeting.)
Deviation from the Corporate Governance Recommendation: Unlike stated in Recommendation 33 of the Corporate Governance Recommendation, the Board of Directors has not established a Nomination Committee to assist the Annual General Meeting in the nomination process of Board members. Instead of that, the shareholders have considered it essential, that the Annual General Meeting establishes a Shareholders’ Nomination Committee for preparation of a proposal for election of Board members to be presented to the Annual General Meeting.
Board of Directors
Composition and term
According to the Articles of Association, the Board comprises at least three and no more than eight full members, elected by the Annual General Meeting for one year at a time. The AGM nominates one member of the Board to serve as Chairman.
At its meeting on 26 April 2004, Exel's Board of Directors confirmed written rules of procedure that specify the Board’s duties, matters to be handled, meeting practice and decision-making process. The rules of procedure are reviewed and updated annually in the first meeting following the election of the Board in the AGM.
Board meetings are attended by the President and CFO, who acts as the meeting secretary.
According to the Corporate Governance Recommendation, the majority of the Board shall be independent of the Company. In addition, at least two of the members of the Board representing this majority shall be independent of significant shareholders of the Company.
Duties
The Board of Directors is responsible for the management of the company and the proper organisation of its activities in accordance with the Finnish Companies Act and the company's Articles of Association. The Board’s principal duties include confirmation of the corporate strategy and budget by function, and decisions on funding agreements, major investments and the purchase or sale of assets. The Board draws up interim reports, the financial statements and the report on operations, appoints the President and CEO and the Deputy Managing Director and decides on the President and CEO’s salary. The Board monitors the Company's financial position with the help of information provided by the Management Group.
The Board shall review yearly its work and working practices yearly at the first meeting following the AGM.
The Board shall, at the first meeting following the AGM, estimate the independence of each member of the Board.
Meetings, remuneration and other benefits
The Board of Directors convenes approximately 10 times a year. The AGM shall determine the remuneration of the Board members.
2007
Evaluation of independence
Exel's Board of Directors has evaluated the Board members' independence of the Company in accordance with item 18 of the Corporate Governance Recommendation. The members of the Board are considered to be independent of the Company. Ove Mattsson, Kari Haavisto and Vesa Kainu are independent of the significant shareholders. Peter Hofvenstam and Esa Karppinen are not independent of the major shareholders as the former is Vice President of
Exel's Annual General Meeting held on 19 April 2007 elected Kari Haavisto, Peter Hofvenstam ,Vesa Kainu, Esa Karppinen and Ove Mattsson to the Board of Directors. Ove Mattsson was re-elected as Chairman of the Board.
The 2007 information on the members of the Board (biographical details and holdings) is presented separately under the heading “Members of the Board”.
The Board convened 13 times in 2007 and the average attendance rate at these meetings was 95%.
Based on a decision made at the AGM, the monthly and meeting fees paid in 2007 to the Board members were:
Annual fee for the Chairman EUR 32,000
Annual fee for each Board member EUR 14,000
Remuneration per meeting for the Chairman EUR 1,500
Remuneration per meeting for each Board member EUR 1,000 per capita
Remuneration paid to the Board members in 2007 for their duties in the Group totalled EUR 121 thousand. Board members are also entitled to per diem allowances and travel allowances in accordance with Exel's general travelling compensation regulations.
The 2007 breakdown of fees by Board member is presented separately under the heading “Members of the Board”.
Exel has no such incentive programme by which the company rewards the Board members with option rights or Company shares.
Board of Directors' committees
The Board has set up among its members two permanent committees, the Compensation Committee and the Audit Committee, which was set up in spring 2007. The Board Committees are supervised by the Board. The Board has approved written charters for Board’s Committees.
The Compensation Committee comprises the Chairman of the Board and two other Board members. The task of the committee is to analyse the competitiveness of Exel's internal rewarding and incentive programmes and to prepare proposals to the Board concerning the President and CEO’s salary and other benefits.
In addition, the Compensation Committee carries out annually in February-March an evaluation of the President and CEO’s competitive total compensation compared to similar tasks on the market. The Compensation Committee draws up a proposal of the compensation to the Board of Directors. The President and CEO presents a proposal of Group Management of a competitive compensation to the members of the Group Management annually in February-March. The Compensation Committee handles the proposal and proposes it as is or amended to the Board of Directors, which then makes a decision on the matter.
The Audit Committee comprises the Chairman of the Board and one Board member. The Audit Committee oversees Exel´s finances, financial reporting, risk management and internal auditing. It is also responsible for assisting the Board in monitoring Exel´s financial position, reporting and controlling.
Deviation from the Corporate Governance Recommendation: Recommendation 28 of the Corporate Governance Recommendation requires that the Audit Committee shall comprise at least three members. According to the unanimous decision of the Board, the Audit Committee consists of two members. Taking into consideration the Board’s size (5 members) the Board considers that the present composition of the Audit Committee is appropriate for the effective functioning of the Audit Committee as well as the Board.
The Compensation Committee met 3 times and the Audit Committee 2 times during 2007.
President and CEO, and Management Group
The President and CEO is appointed by the Board to run the Company on a day-to-day basis in compliance with existing laws and regulations, as well as instructions and decisions given by the Board. The areas of responsibility of the President and CEO include, in addition to the above mentioned legal requirements, and implementing the Board’s decisions, specifically also securing growth of the business, acquisitions and strategic projects, the increase in shareholder value, profitability and efficiency of operations, and investments within the limits defined by the Board.
The President and CEO has a managing director contract approved by the Board that defines the responsibilities, powers, remuneration and termination procedure applying to the position. The President and CEO has no separate pension agreement. In addition to monthly salary and fringe benefits, the President and CEO is eligible for a performance-based bonus on an annual basis and a long-term incentive.
The President and CEO is aided by the Management Group and is also a member of it. The Management Group includes, in addition to the President and CEO, the Executive Vice President / Business Area Manager Europe, the Business Area Manager Asia/Pacific, the CFO, and the Senior Vice President / Operations. The President and CEO chooses the members of the Management Group and directs its activities. The Group meets 6 to 10 times a year. Its duties include, in addition to daily running of the business and development of all areas of the business, also drawing up business and strategic plans and implementing them.
2008
Vesa Korpimies, M.Sc. (Econ.), is Exel's President and CEO.
2007
Salaries, bonuses and fringe benefits
In 2007, the salaries, bonuses and fringe benefits paid to Göran Jönsson, President and CEO, totalled EUR 239 thousand. In addition to salary in money he has a housing and phone benefit.
The 2007 information on the President and CEO (biographical details and holdings) is presented separately under the heading “Members of the Management Group”.
Top management compensation and incentive schemes
The Compensation committee makes a proposal for the President and CEO's remuneration to the Board of Directors who makes the decision on the remuneration.
The President and CEO presents the remuneration of the other members of the Management Group Team to the Compensation Committee. The Compensation Committee makes a proposal to the Board of Directors for the decision on the remuneration.
Exel’s Board of Directors has approved the principles of a performance-based bonus system for the Group's top management.
Long-term incentive program
The Board of Directors of Exel Plc has in 2007 established a long term incentive program for the top management of the Company. The aim of the program is to commit persons entitled to participate in the Program to improve Exel Plc’s long-term profitability and value and reward them for achieving these goals. The Program consists of three subprograms (one for each of the financial years 2007, 2008 and 2009) with the total duration of each of the subprograms being three years and two to four months.
The Participants shall earn the reward under each of the subprograms as and when the financial performance targets as set by the Board of Directors for the subprogram have been met. The Board of Directors will decide on the targets related to the growth of the Exel Group's earnings per share (EPS) and return on capital employed (ROCE) for each subprogram separately before the beginning of the subprogram. The maximum amount of reward for each subprogram is decided by the Board of Directors.
Auditors and audit system
The Company has one auditor elected by the Annual General Meeting. The auditor must be an Authorised Public Accountant approved by the Central Chamber of Commerce. The term of office of the auditor shall expire at the end of the first Annual General Meeting following the election.
Ultimate responsibility for accounting and financial management lies with the Board. The auditor gives a statutory report to the shareholders in connection with the closing of the Company accounts each year. The purpose of the auditing process throughout the year is to ensure that the financial statements give a true and fair view of the Group's financial performance and status during the financial year. Foreign subsidiaries are included in the yearly audit programmes.
The Board meets the auditor at least once a year.
Apart from this, the auditor carries out supervisory audits as he deems necessary and as agreed on with the Company.
2007
Ernst & Young, Authorised Public Accountants, with Eija Niemi-Nikkola, APA, as principal auditor, were elected to serve as Company auditor in the AGM in 2007. The fees paid in 2007 to the external auditor for auditing Exel Group companies totalled EUR 383 thousand, while the fees paid for non-audit services totalled EUR 92 thousand.
Internal control, risk management and internal audit
The business operations of Exel are managed and supervised in line with the governance and management system described above.
The ultimate responsibility for the appropriate arrangement of the control of the Company accounts and finances falls on the Board of Directors. The President and CEO is responsible that the accounts are in compliance with the law and that the financial affairs have been arranged in a reliable manner.
Financial reporting and control of the Group
Implementation and control of financial and other business targets are monitored through Group-wide financial reporting, and through constant management meetings in each of the business units. The financial reports include actual results, plans and up-to-date forecasts for the current year. The management meeting business reviews include financial reports, follow-up of business plans, monitoring of new plans, follow-up of internal and external projects, quality and personnel issues.
Risk management
The central short-term goal of Exel is to distinctly improve the profitability and competitiveness and to secure the financial position of business demands. The primary task of Exel's enterprise risk management concept is to support the realisation of these goals. As a part of corporate governance, risk management is a systematic tool for the Board of Directors and the operative management to monitor and assess the realisation of the goals, threats and opportunities affecting the Company operations.
The task of Exel's risk management is also to support in adapting to the changes in business and risk environment.
The Management Group of the Company has adopted the risk management guidelines based on the principles approved by the Board. The divisions are responsible for implementing risk management and identification of risks. The Management Group monitors the development of risks and risk concentrations.
Risks relative to assets, interruption and liability risks arising from business operations have been provided for with appropriate insurances.
Based on the effective operation of the group financial control, including the established controller function, the Company does not have a separate internal audit function.
Updating corporate governance
The updated Exel corporate governance statement can be read at these Internet pages. Exel’s Internet pages are published in Finnish and English.
Last update: 26 February 2008
