Corporate Governance Guidelines
PKC´s Board of Directors has ratified these Corporate Governance guidelines, which are in line with the Corporate Governance Code 2015. The Board of Directors is responsible for complying with the Corporate Governance guidelines and has committed itself to developing them further to benefit shareholders.
Corporate Governance is geared towards establishing a framework for responsible operations that generate added value for customers and shareholders as well as bolster the confidence of all interest groups (customers, shareholders, personnel, providers of finance, goods suppliers, etc.) in the organisation´s management and operating procedures. Corporate Governance applies to all the employees and not just the senior management, and all employees are bound to comply with the Group´s values, principles and objectives. PKC´s Board of Directors confirms the values that have been jointly selected by the employees. The values are presented on the company´s web site.
These Corporate Governance guidelines are published in their entirety on the company´s intranet pages, where all employees can read them. The guidelines are also published in their entirety on the company´s website and the key sections are included in the Corporate Governance Statement. The Corporate Governance guidelines are reviewed and updated as necessary.
The Finnish Corporate Governance Code is publicly available, for example, on the website of the Finnish Securities Market Association www.cgfinland.fi.
In addition to legally mandatory bodies (General Meeting, Board of Directors and president), the Group´s management includes the Executive Board. The internal relationships, responsibilities, authorisations, obligations and operating practices of these parties and other personnel in the company´s employ have been established – within the framework laid down in law – to guide and manage business operations and administration in a manner that increases shareholder value.
The highest power of decision within the company is vested in the General Meeting, whose duties as specified in the Companies Act and the Articles of Association include:
- deciding on amendments to the Articles of Association, increasing or decreasing the share capital and issuing convertible bonds, bond loans with warrants or options,
- confirming of the financial statements and the consolidated financial statements and disposal of the profit,
- deciding on releasing the Board members and president(s) from liability,
- deciding on the number of Board members and auditors, electing Board members and auditors and deciding on the remuneration to be paid to Board members and auditors and the principles to be applied in the reimbursement of travel expenses.
Each shareholder is entitled to participate in the General Meeting and to exercise the right to speak and to vote, with each share carrying one vote.
According to the Articles of Association, the General Meeting is held in the company´s domicile in Helsinki. The Annual General Meeting is held, upon completion of the financial statements, on the day specified by the Board of Directors, which shall be no later than by the end of June.
A shareholder has the right to put items falling within the competence of the general meeting by virtue of the Limited Liability Companies Act on the agenda of the general meeting, if the shareholder so notifies the board of directors in writing well in advance of the general meeting so that the item can be added to the notice of the general meeting. Company shall, no later than by the end of the financial period preceding the general meeting, disclose on its website the date by which a shareholder must notify the company’s board of directors of an issue that he or she demands to be addressed at the general meeting as well as instructions on the email or postal address to which the shareholder’s demand should be sent.
Invitation to the General Meeting shall be published on the Company´s Internet pages no more than three (3) months and no less than three (3) weeks prior to the meeting. The notice of the general meeting shall contain the following information:
- the time and place of the general meeting
- the proposed agenda for the general meeting
- the proposals regarding the composition and remuneration of the board of directors and the auditorother proposals, if any, of the board
- a mention of the procedures that a shareholder must comply with in order to be able to participate and to vote at the general meeting
- a mention of the procedures that a shareholder must comply with in order to be able to participate in the general meeting through a proxy holder
- a mention of a shareholder´s right to ask questions on issues on the agenda of the general meeting
- the date on which a shareholder entered in the shareholder register has the right to participate in the general meeting and to cast his or her vote (so-called record date)
- the total number of company shares and the total number by share class at the date of the convocation
- where the documents and proposals for resolutions of the general meeting are available
- the address of the company website.
The notice of the general meeting and the documents to be kept available to the shareholders shall be published on the company website at least 3 weeks before the general meeting. The documents shall also be available at the general meeting.
In order to realise interaction between shareholders and the company´s governing bodies, as well as the right of shareholders to ask questions, the president, chairman of the Board of Directors, Board members and the auditor (annual general meeting) and such persons as have been proposed for Board membership for the first time shall be present at the general meeting.
The minutes of the general meeting including the voting results and the appendices of the minutes that are part of a decision made by the meeting, shall be posted on the company website within two weeks of the general meeting.
Board of Directors
Members of the Board of Directors and nomination procedure
According to the Articles of Association the Annual General Meeting elects 5-7 members to the Board of Directors. The term of office of Board members ends at the conclusion of the next Annual General Meeting following their election.
A person to be elected to the Board of Directors shall have the required competence for the task and the possibility to devote a sufficient amount of time to the work. Board members are elected such that they represent both a wide range of expertise and the viewpoint of shareholders. According to Limited Liability Companies Act legal persons, minors, persons under guardianship, persons with restricted legal competency, and bankrupts cannot be elected to the Board. Company has established principles concerning the diversity of the Board of Directors, which include i.a. representation of both genders on the board.
The majority of the Board members must be independent of the company and at least two of said majority must be independent of the company´s significant shareholders. Board members must provide the Board of Directors with sufficient information for evaluating their competence and independence and report any changes in this information. Board members do not represent the parties that proposed them for Board membership or any other parties belonging to their sphere of interest. The Board of Directors evaluates the independence of its members annually. The independence of Board members is reported in the company´s Corporate Governance Statement and on company´s website.
The members of the Board of Directors are presented in the Corporate Governance Statement and on the company´s site at company´s website.
The proposals for nomination and remuneration of the Board of Directors to the general meeting are prepared by the shareholder’s nomination board. Nomination Board shall consist of representatives of the three largest shareholders and the Chairman of the Board of Directors, acting as an expert member. The right to nominate members shall be vested with the three shareholders of the company having the largest share of the votes represented by all the shares in the company on September 1 based on the company’s shareholders’ register held by Euroclear Finland Ltd. The charter of the Nomination Board is published in its entirety on the company’s website and its key content is summarised in the Corporate Governance Statement Nomination Board’s proposals shall be included in the notice of the general meeting. The same applies to a proposal for the composition of the board made by shareholder(s) holding over 10% of the voting rights in the company, provided that the candidates have given their consent to the election and the company has received information on the proposal sufficiently in advance so that it may be included in the notice of the general meeting. Such proposals made after the publication of the Notice of Meeting will be published separately. The company shall report the biographical details of the candidates for the board on its website.
Duties of the Board of Directors
The Board of Directors attends to the Group´s administration and the due organisation of operations. The Board´s responsibilities include the duties specified for it in the Companies Act and the Articles of Association. The Board´s main duties include confirming the Group´s strategy and budget, deciding on financing agreements and the purchase and sale of major asset items. The Board monitors the Group´s performance by means of monthly reports drafted by management and other information supplied by management.
The duties of the Board of Directors include, but are not limited to:
- laying down instructions and rules concerning the due organisation of administration and operations,
- appointing the president& CEO and deputy CEO and supervising the president´s activities,
- deciding on matters that are unusual or of far-reaching consequence in light of the scope and quality of the company´s operations and the framework of its field of business,
- representing the company,
- granting procuration authority to sign the business name on the basis of the Articles of Association,
- taking on responsibility for and responding to claims for damage as well as deciding on instituting damage claim proceedings,
- taking on responsibility for the Group´s operations, result and development,
- preparing the matters to be discussed at the General Meeting,
- executing the decisions of the General Meeting,confirming the long-term strategy,
- approving the budget,
- deciding on the development of investments and significant individual investments,
- deciding on acquisitions and strategically important business expansions and quasi-equity investments,confirming the Group´s risk management principles,
- appointing the directors who serve directly under the president based on president´s proposal,
- approving the principles for salaries and other benefits paid to personnel as well as for the bonus systems,
- attending to all such tasks that have not been set for the other corporate bodies in the Companies Act or the Articles of Association.
It is the task of the Board of Directors to promote the best interests of the company and all the shareholders.
Working principles of the Board of Directors
The Board of Directors elects from amongst its members a chairman and possibly also a vice chairman whose terms of office last until the conclusion of the subsequent Annual General Meeting. The company´s president may not serve as the chairman or vice chairman of the Board of Directors.
The Board meets on average once a month and whenever necessary. The aim is for all Board members to be present at the meetings. If necessary, telephone meetings can also be held and decisions adopted without holding a meeting by decision minutes. The number of Board meetings held during the financial year and the average attendance rate of Board members at the meetings are disclosed in the Corporate Governance Statement.
The Board of Directors has drafted a written charter for its operations. It defines the key tasks and operating principles of the Board of Directors. The charter is published in its entirety on the company´s Internet site and its key content is summarised in the Corporate Governance Statement.
The reports on the agenda are sent to the Board members in good time before the meeting, along with other information on significant matters when this is necessary, so that the Board members can become thoroughly acquainted with the issues at hand and thus make informed decisions. Board members also have the right to contact the Group´s employees or its experts to get more in-depth information if they so wish.
Each year, the Board of Directors independently self-assesses the effectiveness of its work and the quality of its task completion with an eye on development opportunities.
The Board has established among its members an Audit Committee, which shall concentrate particularly on review and preparation of matters pertaining to financial reporting and control and a Remuneration Committee, which shall prepare the matters pertaining to the appointment and remuneration of the managing director and other executives of the company as well as the remuneration schemes of the personnel. The Board has approved written charters for the Committees, which are published in their entirety on the company´s website. The Board has not deemed necessary to establish other committees, since, taking into account the scope and nature of the company´s operations as well as Boards´ working methods, the Board is able to handle matters effectively without such committees.
Election of the president
The Board appoints the company´s president and defines his terms and conditions of employment in writing. The president's service contract is valid indefinitely. The company´s president´s profile is presented in the Annual Report and on the company´s website.
Duties of the president
As specified in the Companies Act, the president shall attend to the day-to-day administration of the company in accordance with the instructions and rules laid down by the General Meeting and the Board of Directors. The president is responsible for the operational management and supervision of business operations.
The president´s duties include, but are not limited to:
- executing the decisions of the senior corporate bodies,
- informing the Board and presenting matters over which the Board has the power of decision,
- representing the company in court and in dealings with the authorities in matters belonging to the president´s duties,
- managing and supervising the Group´s personnel,
- responsibility for the reliability of accounting and asset management,
- responsibility for the development of the Group´s operations,result and cash flow,
- ensuring the legality of business functions,
- supervising compliance with legislation, official regulations and the rules of the Stock Exchange.
The president´s mandate does not include measures that are extraordinary or of far-reaching significance in terms of the scope and nature of the company´s operations.
Executive Board and the organisation of business operations
PKC has an Executive Board whose task is to improve operative operations, carry out strategy work and monitor the realisation of the objectives and action plans set in strategy work as well as deal with other matters of vital importance for the company´s operations. The Executive Board comprises President and CEO (Chairman) and persons appointed by the Board upon President and CEO´s proposal. The Executive Board convenes on average monthly. The members of the Executive Board are presented in the Corporate Governance Statement and on the company´s website.
The Executive Board and specifically the Executive Board members with business unit responsibility are responsible for the organisation and development of the businesses under their responsibility area. The Executive Board shall decide on policies and strategies relating to the business within the framework approved by PKC´s Board.
The companies belonging to the PKC Group are described in a separate Group companies –attachment.
The Boards of Directors, the equivalent governing bodies, presidents and other management of Group companies are appointed by the president of the parent company and/or the responsible Executive Board member, who also decides on the terms of their service, in accordance with the general principles approved by the Board of Directors.
The Boards of Directors and the equivalent governing bodies of Group companies consist mainly of representatives of PKC´s management. The managing directors, Boards and the equivalent governing bodies of Group companies are responsible for all the duties set out by the parent company, Executive Board, the Executive Board members with business unit responsibility as well as the legislation and regulations of the country in question.
The PKC Group maintains and develops rewarding compensation systems. The aim of the Group´s incentive schemes is to encourage operations that increase the Group´s value.
Salaries and remuneration and other benefits
The remuneration paid to the Board of Directors is confirmed by the Annual General Meeting. Board members are not paid shares or share related rights as remuneration. The company reports on the remuneration paid to Board members during the financial year in the Remuneration Statement, published on the website. If a board member has an employment relationship or service contract with the company or its subsidiaries or acts as advisor of the company or its subsidiaries, the company shall describe the salaries and fees as well as other financial benefits paid for this duty during the financial period.
The Board of Directors confirms the president´s salary and other benefits. The Board of Directors reviews the president´s salary annually. President is included in the management´s bonus system, with a maximum annual bonus of six months´ salary depending on the achievement of the objectives set for each year. The president´s service contract has provision for 3 months notice period from the President´s part and 6 months from company´s part. In case the company terminates the contract without specific reason that would according to the employment contract law entitle to termination the president is entitled to a severance payment corresponding to 12 months´ salary. The retirement age is statutory and no voluntary insurance policies have been taken. The company discloses the amount of the president´s salary, remuneration, fringe benefits and other benefits paid during the financial year in the Remuneration Statement. In addition, the Remuneration Statement summarises the other financial benefits of the president´s employment relationship, such as the age of retirement, the criteria for determining the pension and other significant terms and conditions pertaining to remuneration.
The Board of Directors confirms the salaries and benefits of the members of the Executive Board. Salaries are set in accordance with the demands of the job and the responsibilities, professional skills and expertise it entails. Salaries are reviewed annually by the Board of Directors. Salaries may comprise cash salaries and benefits. The members of the Executive Board are included in the management´s bonus system.
Short-term Remuneration - Bonus System
The Group has in force a result based bonus system approved by the Board of Directors, the purpose of which is to reward achievement of strategic objectives and to offer competitive incentive scheme for personnel. The principles, terms and conditions, earnings criteria, maximum and minimum limits of targeted yield levels are confirmed annually by the Board. The members of the Executive Board, other key personnel, and also white and blue collar employees in Finland, are included in the system. The limit of the annual bonus is predominantly maximum of six months' salary, depending on the achievement of the objectives set annually. The system's earning period is the financial year.
Long-term Remuneration - Remuneration systems based on shares or share related rights
PKC's long-term remuneration consists of stock-option schemes and the share-based incentive plans. Such remuneration systems shall be presented in the Remuneration Statement.
In accordance with the Board´s decision, new voluntary pension insurance policies will not be taken out and no other particular benefits have been granted within the company.
The company complies with the Insider Guidelines of Helsinki Stock Exchange. The Board of Directors is responsible for complying with the Insider Guidelines and has committed itself to developing them further. Information on compliance with the Insider Guidelines is published in the Corporate Governance Statement and on the company´s website.
The company maintains deal-specific or event-based (“Project-specific”) insider lists. Company informs insiders in writing (by e-mail or otherwise) about the legal and regulatory duties entailed and the sanctions applicable to insider dealing and unlawful disclosure of inside information obtains written acknowledgments (e-mail confirmation or otherwise) from insiders that they acknowledge the legal and regulatory duties entailed and are aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information. The written confirmation shall be conducted the first time a person is included in any insider list without having to repeat the process in any subsequent insider lists.
In addition, company maintains separate list of persons discharging managerial responsibilities (“managers”) and their closely associated persons.
General Counsel is the person in charge of insider issues and shall attend to the duties belonging to the insider management as well as duties relating to the list on insiders. Company may appoint also other persons to carry out the duties.
Project specific insider list
Project specific insider lists are kept for each deal, event or project constituting inside information. Project specific insider lists include all persons who have access to inside information in question and who are working for Company under a contract of employment, or otherwise performing tasks through which they have access to inside information, such as advisers, accountants or credit rating agencies.
Board of Directors or the President & CEO decides on the establishment of project specific insider list.
Prohibition of abuse of inside information
Prohibition of the abuse of inside information covers trading, recommendation, amendment or cancellation of orders as well as unlawful disclosure and infringements may result in administrative and pecuniary sanctions imposed by the Financial Supervisory Authority as well as criminal sanctions.
The prohibition against abuse of inside information shall apply to all persons who possess inside information in spite of wherefrom or how the information has been received. Thus, the prohibition against the abuse of inside information shall apply to others than insiders of the company.
During the 30 days preceding the publication of the company’s financial reports (closed window) persons discharging managerial responsibilities (“managers”) and persons participating in the preparation of financial reports may not trade in the company’s shares or share related rights. In addition, trade restriction applies to all insiders during the time that they have insider information. The trading restriction related to closed window and insider information ends on the publication of stock exchange release or on the abandonment of a project. It is recommended that trading be scheduled to take place within 30 days after the end of the trading restriction.
The company recommends that persons discharging managerial responsibilities (“managers”´) treat the shares as long-term investments and do not trade them actively.
Persons discharging managerial responsibilities, as well as persons closely associated with them, shall notify the Company and the Financial Supervisory Authority of every transaction conducted on their own account relating to the shares or debt instruments of the Company or to derivatives or other financial instruments linked thereto exceeding the national threshold [EUR 5,000 p.a.].
“Person discharging managerial responsibilities” means a person, who is:
a) a member of the administrative, management or supervisory body of Company;
b) a senior executive who is not a member of the bodies referred to in point (a), who has regular access to inside information relating directly or indirectly to Company and power to take managerial decisions affecting the future developments and business prospects of Company
The Company has specified that members of the company's Board of Directors, President & CEO and members of the Executive Board are managers subject to managers’ transaction notification obligation. The Company keeps a list of managers and their closely associated persons.
Managers and their closely associated persons obliged to make the notification promptly and no later than 3 business days after the date of the transaction and the Company obliged to publish the information promptly and no later than 3 business days after the date of the transaction via a stock exchange release.
Company is obliged to inform managers in writing about the obligations and managers obliged to inform their closely associated persons in writing about the notification obligation and to keep a copy thereof.
Company publishes managers’ transactions as stock exchange announcement.
The company also recommends that managers ask the president or the person responsible for insider issues within the company (General Counsel) whether there are impediments to trading before making a deal. General Counsel shall be the principal person in charge of management of managers’ trading issues.
Related party transactions
The company keeps a list of parties that are related to the company and assesses and monitors related party transactions. The Company shall report the decision-making procedure applied in connection with related party transactions that are material to the company and that either deviate from the company’s normal business operations or are not made on market or market equivalent terms once a year in the Corporate Governance Statement.
The purpose of internal control and risk management is to ensure the effective and successful operation of the Group, ability to identify, evaluate and monitor risks related to the business operations and compliance with the relevant regulations and operating principles.
Risk management is part of the Group´s control system. PKC Group has in use a group-wide risk management policy, which the parent company´s Board of Directors has confirmed. The objective of the risk management policy is to define the group-wide guidelines and set such goals for risk management that the group´s overall risk level is evaluated systematically and comprehensively in order to achieve the business objectives.
PKC Group Plc is the parent company for the whole group, so it manages and directs the operations for the whole group. The main responsibility for the internal control and risk management systems relating to the financial reporting process lies with the Board of PKC Group Plc. In this task the Board is assisted by the Audit Committee, whose main tasks include supervising the financial reporting process, monitoring the efficiency of the company´s internal control, internal audit, and risk management systems as well as monitoring significant economic risks and the measures to manage them.
The Board of PKC Group Plc has approved the internal control guidelines for the whole group, in which the general principles for the division of responsibilities, rights and control are determined at Group level.
The responsibility for the practical organisation of internal control and supervision rests with the president. Business responsible Executive Board members are responsible for the implementation of practical measures for internal control and for ensuring that the organisational structure of their own responsibility area is maintained so that authority, responsibilities and reporting relationships are clearly and thoroughly defined. They are also responsible for ensuring that the subsidiary companies have competent management, who adopt a sensible and steady management style and comply with the group and business area level guidelines and regulations.
Internal supervision methods include internal guidelines, reporting and various technical systems related to operations as well as internal audit.
The principles and objectives of risk management
Risk management is an integral part of everyday activities that increase corporate safety and facilitate the achievement of the set business objectives. The objective of the risk management is to form an operating environment in which all risks related to the business operations are managed comprehensively and systematically in all organisation levels. The principle is that all risks are identified, their magnitude and significance are assessed, the control measures are specified and the system for monitoring the implementation and effect of the measures is defined. Risk management process supports strategic planning, decision-making, continuity of operations and reporting at all organisation levels.
Comprehensive enterprise risk management creates added value to the company by safeguarding the achievement of the set business objectives and continuity of operations internally to group´s personnel and externally to customers, owners and other interest groups. With effective enterprise risk management the confidence of all interest groups in the company´s business operations is bolstered.
The key risk areas
PKC Group´s key risks include risks related to disturbance of deliveries, financing, personnel, labour safety, and information security and systems. For each of the key risks group-wide guidelines are drafted and they are monitored and developed continuously.
Operative risks include all the factors that may endanger or hinder the achievement of the set business objectives.
Operative risks include e.g. the following:
- Business environment and business cycle risks
- Market and customer risks
- Purchasing and logistics risks
- Risks related to organisation and management
- Risks related to manufacturing process
- Contract and liability risks
- Political, cultural and legislative risks
- Crisis situations
The main responsibility for hedging the operative risks is held by the Executive Board members in their own responsibility area.
Business environment and business cycle risks
Business cycles in the world economy affect demand for the products of PKC´s customers and thus also demand for the products manufactured by PKC and they influence its financial position in the short term. The long-term effects are evened out by the wide geographical spread of the operations of PKC´s customers, the ability to operate in different customer industries, long-term co-operation with the main customers, and the continuous improvement of the efficiency of operations.
Market and customer risks
The Group´s operations are dependent on agreements made with a relatively few globally operating customers and the development of their businesses. In order to decrease the risk associated with its clientele, the Group is focusing on its core competencies and the development of its know-how, and in so doing ensuring the deepening of its current customer relationships. PKC is also seeking to expand the customer base within its current areas of business and is also studying opportunities outside the current business areas.
PKC´s field of business is characterised by constant downward pressure on prices. Cost-effectiveness is being increased by continuously developing products, rationalising production, seeking out new and more flexible ways of working, making material suppliers compete harder for the company´s business and moving production to countries where labour costs are lower.
Purchasing and logistics risks
Materials account for an important share in the overall costs of end products. In order to lower material costs, purchasing prices are negotiated on a centralised basis, suppliers are asked to submit competitive bids and alternative suppliers are sought continually, whilst also developing the purchasing function further. Suppliers are audited in accordance with the procedure described in the quality system.
PKC Group buys the components needed in the manufacture of its products mostly from outside suppliers. PKC uses written contracts with its suppliers and aims to conclude global frame agreements with the major suppliers.
The trends in the world economy may affect the prices and availability of raw materials. A significant increase in copper price may weaken PKC Group´s profit in short term. Risks related to copper prices can be hedged through purchasing agreements and by means of raw materials futures and options. Also changes in the prices of oil and some other materials can indirectly hamper the Group´s operations if price fluctuations lead to a drop in demand for customers´ products. Price fluctuations of electric energy do not have an essential effect on the Group´s result.
The disturbances in deliveries may cause interruptions both at PKC and its customers. The risk is reduced by finding alternative suppliers, supplier audits, professional skill of the personnel working in the logistics, good customs co-operation and, to some extent, by buffer stocks. Generally accepted delivery terms are used in the deliveries of raw materials and components as well as end products. PKC Group has prepared for e.g. interruption and liability risks by means of insurance programmes covering the entire Group and through local policies supplementing them.
Risks related to manufacturing process
The efficiency and functionality of processes and working methods are monitored through internal assessments. The results of the assessments are utilised in continuous improvement of operations and response times by e.g. developing testing methods and employing new technologies.
The monitoring and development of the efficiency of production include aspects such as developing the working environment, keeping production machinery up to date, operational reliability and the degree of automation, maintenance programmes and the availability of spare parts as well as factors relating to the personnel´s work.
Contract and liability risks
The Group seeks to limit the contract and liability risks by means of written agreements and by taking out comprehensive insurance coverage. Written agreements have been made with major customers and suppliers and PKC´s aim is to carry contractual liability risks stemming from customer contracts to its suppliers to the extent applicable. One of the main purposes of the agreements is to agree on operating procedures and conditions to prevent the materialisation of risks, to divide responsibilities and to minimise any damage that may occur. In addition, product-related liability risks are warded off in advance by applying the procedures described in the quality system. PKC has prepared for property, business interruption, transport and liability risks (incl. product liability, operational liability and management liability) by means of insurance programmes covering the entire Group and through local policies supplementing them. Despite the preventive and restrictive means PKC may face damages that fall beyond the scope of the insurance coverage due to the scope or nature of damages. The insurance coverage is being monitored actively and developed together with experts.
Political, cultural and legislative risks
The PKC Group´s production is spread out over a wide geographical area, as is that of PKC´s main customers. Unfavourable political, economic and legislative changes may impair PKC´s operations in some countries. The risk connected with emerging countries is reduced by decentralising production across different countries, by complying very diligently with each country´s legislation, through functional co-operation networks, and by means of continuity plans. Legislative development and changes are monitored continuously.
The company´s Board of Directors has ratified the Group´s Treasury Policy, which defines the main activities, common management principles, division of responsibilities as well as control environment for Treasury and related financial risk management processes to be applied throughout PKC Group. Treasury Policy supports the objective of centralized, effective and harmonized Treasury management in the interest of the whole PKC Group.
The objective of PKC Group´s Treasury operations is to support the Group´s business operations and the implementation of the Group´s strategy by providing high-quality and integrated financing and financial risk management solutions.
The main Treasury activities in PKC Group are:
- Securing and maintenance of necessary funding and liquidity for current business operations and new business opportunities.
- Ensuring that the business cash flows and the Group´s liquid assets are managed efficiently.
- Managing relationships with banks and other financial institutions.
- Managing the Group´s capital in an optimal way.
- Managing financial, incl. foreign exchange and commodity risks and minimising financial costs within the defined risk limits.
- Provision of expertise and support to the business in all treasury related matters and dissemination of knowledge about best practices.
- Introducing cash flow, capital and risk management perspective in business decision making.
Strategic risk means the risk of unfavourable consequences that may arise from detrimental choices in business strategies, especially in sizing risks so that they correspond to group´s risk taking ability, production and personnel resources as well as to the professional skills of the employees.
Strategic risks involve e.g. the following:
- Business acquisition and arrangement risks
- Significant investments
- Business expansions to new markets and business segments
Parent company´s Board of Directors´ duty is to define the Group´s willingness to take risks and to make decision on taking strategic risks. The Board of Directors decides also on the entire Group´s investment budget and major individual investments, strategically significant acquisitions and property deals as well as other measures that are extraordinary or of far-reaching in terms of the scope and nature of the company´s operations. Decisions to take strategic risks are made after carrying out diligent and comprehensive preparation, which may include e.g. various assessments, examining alternatives, risks analyses and possible due diligence.
Quality and environmental risks
Commitment to the quality of products and operations is a vital foundation of the group´s operations, with uncompromising quality being one of the most important factors and values guiding the Group´s operations. The cornerstone of R&D and production has always been to uphold product safety and adherence to requirements. In all its functions, the Group complies with the instructions, regulations, laws and restrictions – including those pertaining to environmental considerations – laid down by customers, society and other interest groups. In addition to product quality, steps have been taken to bolster operational quality over the entire production process. Various defect-prevention techniques are used in the planning of production processes and methods.
Even though the environmental impacts of its business are minimal, the Group strives to minimise such effects in co-operation with customers, suppliers and subcontractors in accordance with the principle of continuous improvement. Co-operation over the entire delivery chain is the most effective means of reducing the adverse environmental impacts of the chain of operations and achieving savings by recycling packaging, choosing recyclable materials, cutting down on material losses, energy consumption and unnecessary packaging materials, and other such means. Environmental aspects are reviewed annually.
PKC´s quality and environmental system has been established to achieve the set goals and to serve as a tool for developing the quality and efficiency of processes, products and services. The Group has certified quality and environmental systems that are developed continuously.
Quality and environmental requirements also extend to suppliers and subcontractors, and their performance is continuously assessed during co-operation.
Employees play a decisive role in development and competitiveness. The aim is to establish an efficient and competent working community in which employees feel at ease.
Personnel risks include e.g. the following:
- Employment risks
- Key personnel risks
- Competence risks
- Risks related to inadequate job well-being
- Risks related to the availability of labour force
The primary areas of focus are developing competence, commitment, and well-being at work. Development of competence is based on Group´s business strategies. Plans for the coming years include definition of the required competence and the means to secure such competence. Deputy systems ensure that if any employee is prevented from working or if their employment comes to an end, this will not cause irreplaceable gaps in the competence or interruptions in operations. Job well-being is part of human resources management. It is developed in co-operation with the occupational healthcare unit, the occupational safety organisation and personnel administration. Employees are offered competitive fringe benefits and they are encouraged to develop their own professional skills.
Labour protection and corporate safety risks
Labour protection and corporate safety risks mean the risk of unfavourable consequences that may arise from inadequate labour protection, occupational safety and working environment.
Labour protection and corporate safety risks include e.g. the following
- Occupational accidents
- Work disabilities
- Occupational diseases
- Sick leaves
- Risks related to the safety of business premises
- Natural disasters
- Fire and other accidents
- Crime risks
PKC Group is committed to promoting the health and safety of its personnel. Labour protection – which comprises of maintaining employee health, preventing accidents and sickness, and the malfunction-free operation of production machinery – is a key element in supporting PKC´s business operations and improving both quality and productivity. Efficient labour protection is systematic and is based on the assessment of workplace dangers, health and safety plans and procedures that are followed by all employees. Working conditions and the level of both labour protection and safety are monitored continuously using various means, including regular workplace inspections and atmosphere questionnaires. Labour protection is a key element in supporting PKC´s business operations and the improvement of both quality and productivity. Education, training, counselling, prevention and risk control measures have also been implemented in all of PKC´s units.
Information security and information systems risks
Information security risks mean the risk of unfavourable consequences that may arise in the event that information is not secure from outsiders, information is not available to the right people at the right time, or the accuracy of information cannot be guaranteed. Information systems risks include risks related to e.g. disturbances and inadequacies in technical systems and they cover hardware, software and telecommunications risks.
PKC has drafted a Group-wide information security policy, which specifies the principles of the implementation of information security and creates objectives and guidelines for the development of information security. Policy specifies minimum-level procedures and working instructions for ensuring and maintaining information security. Practical instructions concerning the information security policy are defined in greater detail in the information security guidelines.
Information security covers all information pertaining to the Group, partners, customers, personnel and other interest groups, regardless of in which form or in what way the information is produced, processed, stored, modified, transferred, disseminated or destroyed.
The purpose of information security is to ensure that:
- Information is kept secure from outsiders (Confidentiality)
- Information is available to the right people at the right time (Usability)
- Information is error-free (Integrity)
Effective information systems and telecommunications are a fundamental element of PKC´s operations. Electronic and real-time information transfer between customers, suppliers and PKC´s various manufacturing units is an absolute must for PKC´s smoothly running production operation. Contacts with customers and suppliers are generally handled by means of EDI. Disturbances in telecommunications and deficient capacity are a major risk for efficient business operations. PKC aims to minimise this risk by means of doubled connections. New alternatives for communications links are surveyed when need be with different partners in co-operation. PKC has taken steps to implement alternative solutions when and if necessary.
By means of continuous monitoring as well as surveying more effective solutions that provide greater data security, the Group endeavours to ensure that the data security of applications remains at an acceptable level. Recovery plans are in place to ensure that systems are restored running quickly following a failure or interruption of operations.
Risk management organisation and responsibilities
Parent company´s Board of Directors´ duty is to define the Group´s willingness to take risks, make decision on taking strategic risks, be liable for monitoring the results and measures of the risk management, as well as evaluate the functionality of risk management processes. The Board of Directors holds the final decision making power in accepting the risk management policy.
Executive Board handles risk management issues regularly in its meetings.
Each member of the Executive Board is the risk owner in his/her own area of responsibility. For some particular risks a risk owner may be some other person as defined in e.g. Group´s internal instructions or responsibility matrix. Each risk owner is responsible for, in his/her own area, drafting risk management plans and guidelines, organising their implementation, making sure that the personnel is committed to them. They are also responsible for risk monitoring and report regularly of the risks related to their operations. If need be, risk management work groups consisting of the risk owner and other personnel and experts may be set up in each function.
Reporting and providing of information on risk management
Reporting of risks is continuous and systematic and it has been integrated as part of business reporting. The president presents at Board meetings reports on the Group´s development and also otherwise informs the Board of Directors of significant issues related to business operations without undue delay. In addition, a specific risk management report is presented to the Board of Directors at least once a year.
The Executive Board members report to the president on a monthly basis, adhering to separate guidelines.
Legislation requires that the report by the board of directors contains an evaluation of the major risks and uncertainties. In addition, the interim reports and financial statements releases shall describe major short-term risks and uncertainties related to the business operations.
The company´s auditor must be an auditor approved by the Central Chamber of Commerce (Authorised Public Accountant). The auditor´s term of office is from the Annual General Meeting making the election to the conclusion of the next Annual General Meeting following his/her election.
The proposal for the auditor by the Board, or the audit committee if such has been established within the Board, shall be included in the notice of the general meeting. The same applies to a proposal made by shareholders with at least 10 % of the votes carried by the company shares, provided that the candidate has given his or her consent to the election and the company has received information on the proposal sufficiently in advance so that it may be included in the notice of the general meeting. If the board is not aware of a prospective auditor when the notice is published, a candidate proposed in corresponding order shall be disclosed separately.
The aggregate duration of the consecutive terms of an auditor may not exceed seven years. The seven-year rule applies only to the auditor with main responsibility, not to an audit firm.
At the Board of Directors´ invitation, the auditor participates in a Board meeting at least once a year, thereby enabling open and constructive discussions between the Board and the auditor, and also when his/her presence is required. In addition, the auditor has the right to attend Board meetings regardless of whether the Board has decided to invite him if matters having a bearing on his/her duties are on the agenda.
The auditor shall be present at the company´s Annual General Meeting and, if necessary due to the nature of the matters under review, also at Extraordinary General Meetings. In addition, the auditor may be present at the Audit Committee meetings if need be.
The fees paid to the auditor during the financial period are reported in the Corporate Governance Statement published on PKC´s website. If fees have been paid to the auditor for non-audit services, these fees shall be reported separately.
PKC has in place guidelines and procedure whereby employees may, through independent channel, report any and all kinds of suspected misconduct and infringements of both PKC’s internal guidelines and policies as well as applicable laws, rules and regulation.
PKC Group Plc´s Board of Directors has established Internal Audit function and has approved the Internal Audit Charter.
Internal Audit work is expected to cover risks that threaten PKC Group´s strategic, operational, compliance and reporting related objectives. By bringing a systematic, disciplined and objective approach Internal Audit can help PKC Group to improve the effectiveness of governance, risk management and control processes. Internal audit work should contribute to achievement of the defined objectives.
Internal Audit is a part of sound and prudent management practices and business principles. Functioning and effective Internal Audit requires that corporate culture accepts Internal Audit as a normal and necessary part of operations. All Group personnel shall be obliged to cooperate with Internal Audit function in order to ensure that the objectives of Internal Audit are met.
In its communications, the company complies with the provisions of the Market Abuse Regulation together with other regulation related thereto and ESMA guidelines, Securities Market Act, the decisions of the Ministry of Finance, as well as the rules and recommendations of the Financial Supervision Authority and Nasdaq Helsinki.
Good communication builds trust within the organisation and improves external corporate image. The company seeks to be consistent in all its communications, which is apparent in the communications procedures it has adopted, the informational content it releases and the manner of presentation. Communications are open and the information and estimates presented are substantiated so as to ensure that all market parties have simultaneous access to the same, sufficient and accurate information on the Group, its business operations, risks, financial position, functions, shares, strategy and development outlook.
Communications under the disclosure obligation
The company´s Board of Directors defines the guidelines of communications and decides on the dates and content of the publication of matters falling under the scope of regular disclosure obligations as well as the publication of significant matters falling under the scope of continuous disclosure obligations. As part of its regular disclosure obligations, the company publishes financial statement release, half-yearly report (Q2) as well financial statements / Annual Report.
The fundamental premise of the disclosure obligation is to ensure that all market parties are provided with sufficient and accurate information on securities and their issuers at the same time. Even though the company does not disclose in analysts and investors meetings other than already published information, company does not organise and aims not to attend analyst and investor meetings within 30 days preceding the publication of the company´s financial reports (“silent period´) in order to bolster the confidence of the securities markets. In principal, the company does not comment market rumours or analysts´ estimations at all.
Procedures related to delay of disclosure of inside information and profit warnings
The company has specified procedures for (i) making a decision to delay disclosure and to assess the continuous validity of the delay criteria as well as its preparedness to disclose the information in case it leaks out and (ii) profit warnings.
Delaying the disclosure of inside information is allowed, if immediate disclosure is likely to prejudice the legitimate interests of the Company, delay of disclosure is not likely to mislead the public and the confidentiality of that information can be guaranteed. Decision to delay disclosure can be made by Board of Directors or President & CEO.
Profit warning is issued if the company's profits or financial position shows either a better or a weaker performance than expected or if there is a change in the future prospects of the company (adjustment of previously disclosed future prospects). Profit warnings is disclosed without undue delay as soon as a change has become likely and the managing director or any member of the board of directors has received notice of it.
Investor relations communications
Investor relations communications are attended to by the chairman of the Board of Directors and the company´s president together with the CFO in accordance with the guidelines set by the Board of Directors. Shareholders, members of other interest groups and other parties interested in the Group have the right to contact the president or CFO directly to receive more in-depth information. The president or CFO may provide the requested additional information, while taking insider information regulations and possible non-disclosure agreements made with third parties into account.
In addition to the communication under the disclosure obligation, company publishes financial report presentations in its website.
For the purpose of internal communications, the Group has in use an intranet. Due to the nature of the company´s operations, marketing is primarily business-to-business in nature.
The company has a website at www.pkcgroup.com. The site presents the Group´s business operations, the latest financial figures, ownership structure and other information concerning share ownership as well as information required to be disclosed on the basis of Finnish Corporate Governance Code.
The company updates the information on its website at certain intervals, in accordance with its own practices, so that the information on the website is up to date.