Matti HyytiäinenPresident & CEO
Sinikka RavanderSenior Executive Assistant
Corporate Governance Statement
PKC Group Plc complies with the Finnish Corporate Governance Code 2010. The key sections of the Company's Corporate Governance Guidelines ratified by the Board of Directors are described in the Annual Report. The guidelines are published in their entirety on the company's website.
This is a regularly updated report on corporate governance, not the corporate governance statement in accordance with recommendation 54 of the Finnish Corporate Goverance Code, which is issued separately from the Board of Director's report and is included in the Annual Report, and may be found on our website. Yearly corporate governance statements:
Corporate Governance Statement 2015
Corporate Governance Statement 2014
Corporate Governance Statement 2013
Corporate Governance Statement 2012
Corporate Governance Statement 2011
Corporate Governance Statement 2010
Corporate Governance Statement 2009
The Annual Report also contains a remuneration statement. Remuneration statement may also be found separately on the website.
The Finnish Corporate Governance Code is publicly available, for example, on the website of the Finnish Securities Market Assosiation, www.cgfinland.fi.
Deviations from the Code's recommendations
There are no deviations.
The highest power of decision is vested in the General Meeting, which resolves the issues stipulated in the Companies' Act and Articles of Association.
The Annual General Meeting is held, upon completion of the financial statements, on the day specified by the Board of Directors, no later than the end of June, at the company's registered office in Helsinki. At the Annual General Meeting, matters relating to the meeting are dealt with in accordance with the Articles of Association as are any other proposals to the meeting. Moreover, the company can, if necessary, call an Extraordinary General Meeting.
A shareholder has the right to have a matter handled by the general meeting, if it is relevant to the meeting according to the Companies' Act and if the shareholder notifies the Board in writing well in advance of the meeting so that the matter can be added to the notice of the meeting.
According to the PKC's Articles of Association, 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.
A shareholder is entitled to attend the meeting if he or she is listed as a shareholder in the company´s shareholder register at Euroclear Finland Ltd on the record date indicated in the notice of the meeting and has confirmed his or her attendance in the manner specified in the notice of the meeting and by the deadline specified.
In 2016, the Annual General Meeting was held in Helsinki on 6 April 2016. The minutes of the AGM may be found in Finnish on the website on Annual General Meeting section.
The Board of Directors is responsible for the company´s administration and the due organisation of operations. The Board of Directors has drafted a written charter for its operations, which defines the key tasks and operating principles of the Board. The charter is published in its entirety on the company´s Internet site and its key content is described herein.
The Board´s main duties include confirming the company´s strategy and budget, approving the principles of risk management and ensuring the functioning of the management system. The Board shall decide on matters that are unusual or that have far-reaching consequences in light of the scope and quality of the company´s operations and the framework of its field of business. These matters include the following, among others:
- to decide on acquisitions, mergers and other reorganisations that affect the structure of the Group and on strategically important expansions of the business and equity investments,
- to decide on the development of investments and significant individual investments,
- to approve incentive schemes and remuneration systems relating to the whole group.
The Annual General Meeting elects, in accordance with the Articles of Association, 5–7 members to the Board for a term that expires at the end of the next Annual General Meeting. Board members are elected such that they have the required competence for the task and the ability to devote a sufficient amount of time to the work. Both genders shall, when possible, be represented on the Board. The majority of the Board members must be independent of the company, and at least two of the said majority must be independent of the company´s significant shareholders. The Board of Directors evaluates the independence of its members annually. The Board elects from among its members a Chairman, who according to the Articles of Association cannot be the company´s President. The duties and responsibilities of the Chairman and other Board members have not been designated specifically.
The Board independently evaluates, on an annual basis, the effectiveness of its performance and working methods with an eye on development opportunities. The first time such an evaluation was performed was for the year 2004. The Board performs a self-evaluation via a questionnaire, which the President and all Board members must complete.
In 2016, the Annual General Meeting elected seven people to the Board. Reinhard Buhl, Wolfgang Diez, Shemaya Levy, Mingming Liu, Robert Remenar and Matti Ruotsala Jyrki Tähtinen were re-elected as Board members and Henrik Lange elected as new Board member. After the 2016 Annual General Meeting, the Board of Directors elected Matti Ruotsala Chairman and Robert Remenar Vice Chairman.
The Board members are presented with more detail on the Internet site.
Shareholders’ nomination board
In 2016, the Annual General meeting decided to establish a permanent Shareholders’ Nomination Board with the task of preparing the proposals concerning the election and remuneration of the members of the Board of Directors and to adopt the Charter of the Shareholders’ Nomination Board.
The 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.
In the event that a shareholder who according to the Securities Markets Act has an obligation to take such ownership into account when making notifications regarding changes in ownership (shareholder subject to shareholder disclosure rules), notifies the Chairman of the Board of Directors thereof in writing at the latest on August 31, the shareholding of such shareholder divided between two or more funds or group companies shall be counted as one.
In the event that a shareholder does not wish to exercise the right to appoint a member to the Shareholders’ Nomination Board, the right to appoint shall be transferred to the next largest shareholder in the company’s shareholders’ register, who would otherwise not have a right to appoint a member.
The Chairman of the Board of Directors convenes the first meeting of the Nomination Board and the representative of the shareholder 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, shall be the Chairman of the Nomination Board unless otherwise unanimously decided by the Nomination Board.
The Nomination Board shall annually submit its proposals to the Board of Directors at the latest on 31 January preceding the Annual General Meeting.
Committees of the Board
The Board has established among its members an Audit Committee and a Remuneration Committee. The Board has not deemed it necessary to establish other committees, as, taking into account the scope and nature of the company's operations as well as the Board's working methods, the Board is able to handle matters effectively without such committees.
Audit Committee assist the Board by concentrating on issues relating to financial reporting and control, as well as preparing the proposal for resolution on the election of the auditor. The Board of Directors has drafted a written charter for the Audit Committee, which defines the key tasks and operating principles of the Audit Committee. The charter is published in its entirety on the company´s website.
The Board elects the members and Chairman of the Committee from among its members at the organisation meeting. In 2016, Shemaya Levy was elected as Chairman of the Audit Committee and Wolfgang Diez, Mingming Liu and Henrik Lange as members.
The members must have the qualifications necessary to perform the responsibilities of the Audit Committee, and at least one member shall have expertise specifically in accounting, bookkeeping or auditing. The Committee must have sufficient expertise in accounting, bookkeeping, auditing, internal audit or practices related to financial statements, as the Committee deals with matters pertaining to the financial reporting and control of the company. The expertise may be based on, e.g. experience in corporate management.
The members of the Audit Committee must be independent of the company, and at least one member must be independent of significant shareholders. If the Audit Committee has only two members, both must be independent of significant shareholders. In case the Audit Committee consists of more than three members, of which three are independent of the company, additional one member not independent of the company may be appointed to the Audit Committee for good reasons.
Due to the establishment of Shareholders’ Nomination Board in 2016, Nomination and Remuneration Committee changed its name to Remuneration Commitee. Remuneration Committee assists the Board by concentrating on 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 of Directors has drafted a written charter for theRemuneration Committee, which defines the key tasks and operating principles of the Remuneration Committee. The charter is published in its entirety on the company's website.
The Board elects the members and Chairman of the Committee from among its members at the organisation meeting. In 2016, Matti Ruotsala was elected as Chairman of the Committee and Reinhard Buhl and Robert Remenar as members.
The members must be independent of the company. The President or any other executive of the company may not be appointed to the Remuneration Committee.
The Board appoints the company´s President, who is also the Group CEO. The President supervises the operations and administration of the whole group in accordance with the Companies´ Act, the Articles of Association, the directions of the Board as well as the company´s Corporate Governance Guidelines and other internal guidelines. The President´s service contract has been prepared in writing and shall remain valid until further notice. The President operates as the Chairman of the Executive Board. The company´s President & CEO since April 4, 2012 has been Matti Hyytiäinen. In 2013, President & CEO Matti Hyytiäinen has relocated to Hong Kong on an interim basis in order to further grow Group's business in Asia and China.
The Executive Board supports the President & CEO in managing the Group, but it does not have any authority based on legislation or the Articles of Association. The tasks of the Executive Board are to improve operations, carry out strategic work, monitor the realisation of the objectives and action plans set in strategic work, and deal with other matters of vital importance to operations. The Executive Board comprises the President & CEO (Chairman) and persons appointed at the proposal of the President.
The members of the Executive Board are presented in the Annual Report and on the company´s website, their ownership information at the end of the financial year is reported in the Annual Report and regularly updated ownership information on company´s Internet site under insider register.
The Executive Board and specifically the Executive Board members with business unit responsibility are responsible for the organisation and development of the businesses. The Executive Board shall decide on policies and strategies relating to the business within the framework approved by PKC´s Board.
The board or an equivalent body and the managing director of the group companies are elected, and conditions of service are decided, by the parent company President & CEO and/or the responsible Executive Board member in accordance with the general principles approved by the Board. The boards and equivalent governing bodies of the business areas largely comprise of representatives of PKC´s management. The boards and equivalent governing bodies of the group companies are also responsible for the tasks falling within the remit of the Board and specified by the legislation and regulations of the relevant countries.
The Annual General Meeting elects an auditor approved by the Finnish Central Chamber of Commerce as the company´s auditor. In 2016, KPMG Oy Ab was elected as the company´s auditor, and KPMG declared Virpi Halonen, Authorised Public Accountant, as the principal auditor. The auditor´s term expires after the conclusion of the next Annual General Meeting following the election.
The Annual General Meeting resolves the remuneration and the ground for compensation of travelling expenses of the auditor. In 2016, the Annual General Meeting resolved to pay auditor´s fees and travel expenses in accordance with a reasonable invoice.
The company complies with the Insider Guidelines of Nasdaq Helsinki. 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 and 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. In addition, company maintains separate list of persons discharging managerial responsibilities 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.
The company recommends that the insiders acquire the company´s shares as long-term investments and do not participate in active trading. It is also recommended to schedule the trading within 30 days after the publication of financial reports, whilst taking into account the restrictions that possible insider information imposes. The insiders may not trade in the company´s shares or share-related rights within the 30-day period prior to the publication of the company´s interim reports or the financial statement bulletins, and this closed window ends on the day following the publication of financial results.
Description of the Main Features for the Internal Control and Risk Management Systems Pertaining to the Financial Reporting Processes
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 Board has also approved a 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. Under the Treasury Policy, the Board of Directors of PKC Group Plc is the ultimate decision maker, but the Policy also sets relevant risk limits and delegates certain decision-making authority to the President & CEO and the Chief Financial Officer (“CFO").
The President shall see to it that the accounts of the company are in compliance with the law and that its financial affairs have been arranged in a reliable manner. The CFO manages PKC Group´s financial operations and is responsible for practical arrangement of financial reporting as well as creation and maintenance of adequate and practical internal control and risk management. The CFO and Group Finance are responsible for maintaining necessary reporting and accounting processes and providing instructions to subsidiaries in relation to financial reporting and reporting schedule and content.
Business responsible Executive Board members are responsible for the financial reporting in their responsibility area and 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. Business areas´ general managers, financial managers and chief accountants are responsible for the adequate of financial reporting according to local legislation and instructions received from PKC Group Plc. The subsidiaries are responsible for the daily management of operations, accounting and financial reporting in accordance with the guidelines and regulations established by the parent company as well as local legislation and the regulations issued by authorities.
The Audit Committee monitors financial reporting process.
The Board is responsible for internal control and Board´s Audit Committee is responsible for monitoring the efficiency of the company´s internal control, internal audit, and risk management systems. The Board shall ensure that the company has determined operating principles for internal control and that the company monitors the effectiveness of control procedures. Moreover, it shall ensure that planning, information and control systems used for risk management are sufficient and support the business objectives. The Board of PKC Group Plc has approved the group-wide internal control guidelines and the Treasury Policy. The President and the CFO are responsible for the practical arrangement of control procedures.
The aim of internal control and risk management is to ensure that the company´s operations are efficient and productive, that information is reliable and that regulations and operating principles are followed throughout the Group. The aims of internal control include the following, among others:
- the clear definition of responsibilities, authority and reporting relationships
- the promotion of an ethical atmosphere and honesty
- the achievement of the aims and objectives set and the economical and effective use of resources
- appropriate management of risk
- validity and reliability of financial data and other management information
- separation of the functions relating to commitments, payments and bookkeeping for assets and liabilities, and the reconciliation of these processes
- the safeguarding of operations, data and assets
- ensuring that information flows through the business as required
- ensuring that external regulations as well as internal operating procedures and standards are followed.
Internal control is an essential part of all Group operations at all levels of the organisation. Control procedures are carried out at all levels and in all functions of the whole organisation. The internal control processes include internal guidelines, reporting, various technical systems and procedures relating to operations. They help ensure that management directives are followed and that there is an appropriate response to risks that threaten achievement of the Group´s objectives. The daily tasks include management reviews and audits and operational reviews and audits, carrying out checks that are suitable for each line of business, physical controls, monitoring compliance with agreed acceptance limits and operating principles and monitoring of deviations, a system of approvals and mandates, and various checks and reconciliation arrangements.
In 2014, PKC Group Plc´s Board of Directors has established Internal Audit function and has approved the Internal Audit Charter. Internal Audit is 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.
Risk management is an integral part of internal control. Risk management refers to the identification, assessment, measurement, limitation and monitoring of risks that are fundamentally related to the business or are part of it. The aim of risk management is to identify risks relevant to business operations and to determine the measures, responsibilities and schedules required for effective risk management. Risk management processes go hand-in-hand with strategic process, and the results achieved are used systematically as part of annual plan. PKC Group uses a risk management policy that applies throughout the Group and which the Board of the parent company has approved. Risk management is carried out and risks are reported in accordance with the risk management policy, risk management guidelines, the risk management annual plan and the Group´s risk management process.For the management of financial risks, the Board of the parent company has confirmed the Group´s Treasury Policy. The aim of financial risk management is to protect the Group against adverse changes in the financial markets and thereby to safeguard the Group´s financial results, equity and liquidity. The Group´s financing and financial risk management have been largely centralised within the Group´s finance department. The aims of centralising these functions are effective risk management, cost savings and optimisation of cash flow. The CFO is responsible for the management of financial risks and risks relating to financial reporting, that financial risks are identified, evaluated and controlled in the context of the Group´s general risk management process and separately as part of financial management´s own operational processes.
PKC´s risk management process is based on the COSO ERM Integrated Framework. The comprehensive risk management process is implemented across the whole group with the aim of establishing uniform procedures for the analysis and measurement of risks, taking into consideration the geographical differences between units. Risks are evaluated according to the risk management guidelines. The evaluations are performed regularly, according to the schedule arranged by the parent company, in all the units belonging to the Group by function, and the magnitude of the risks is determined by multiplying probability by the financial impact. In this way, an overall picture can be derived from the results between the various functions and units. On the basis of the risk evaluations, a Group-level analysis report is prepared, in which the controls and measures planned for the most significant risks are described as well as the responsibilities for monitoring and the schedules. The Group-level risk management report is reviewed by the Audit Committee and the Board of Directors at least once a year.
The main principles of risk management and the most significant risk areas have been presented in the Corporate Governance Guidelines, which are available on the company´s website, and the main parts have been described in the risk-management section of the annual report. The management and evaluation of financial risks has been explained in the notes to the consolidated financial statements.
It is necessary to provide adequate and comprehensive information for decision making. The information must be reliable, relevant and timely, and it shall be supplied in the format agreed. The information to be supplied includes financial and operational data sourced internally, data on compliance with external regulations and internal procedures, and external data on the business environment and market developments.
The Board of PKC shall ensure that the company´s financial statements provide adequate and accurate information about the company. The Board of Directors is assisted by the Audit Committee in these tasks. The duties of the Audit Committee include, amongst others
- monitoring the reporting process for financial statements;
- supervising the financial reporting process;
- monitoring the financial position and financing of the Group;
- reviewing the budget, forecast and assumptions related thereto;
- reviewing financial statements, reports by the Board of Directors, interim reports and financial bulletins before approval by the Board, as well as reviewing the annual reports, including, e.g.:
- ensuring the correctness of the company´s financial results together with the company´s management and auditors;
- examining the bases of preparation, and the management estimates used in the preparation work;
- reviewing short-term risks and uncertainties as well as the prospects for the future;
- reviewing the description of the main features of the internal control and risk management systems relating to the financial reporting process, which is included in the company´s corporate governance statement issued in connection with the financial statements and report by the Board of Directors.
The President is responsible for ensuring that the company´s accounting complies with legislation and that the financial administration has been organised in a reliable way. The CFO and the Group finance department determine, support and co-ordinate the financial management for the whole group and the control of operations. The Group finance department is responsible for the monitoring of and compliance with financial reporting standards, the maintenance of bases relating to financial reporting, and providing information and training to units. The duties of the Group finance department also include the financing of Group companies, hedging against foreign exchange and commodity rate risks, investments, the administration of external debt and transfer pricing.
Business responsible Executive Board members are responsible for the financial reporting in their responsibility area. The managing directors, CFO´s, financial managers and chief accountants of the Group companies are responsible for ensuring that reporting by the companies fulfils the requirements of the Group and those of local legislation. Each business unit, Group company and function is responsible for the accuracy of the figures reported by it and the realism of its forecasts. The data provided by the units´ financial management and ERP systems is standardised and transferred to the Group reporting system so that it can be consolidated via automated interfaces.
The Group finance department, managed by the Group CFO, prepares the financial statements specified by IFRS standards and required by external accounting as well as the forecasts, analyses and reports for internal accounting prepared in accordance with the guidelines specified in the Group, for both the Executive Board and the Board of Directors. Short-term financial planning for the Group is based on rolling 12-month business-area forecasts that are updated monthly. Financial results, the achievement of objectives and forecasts are reviewed monthly by the management of each business area and unit, by the Group Executive Board and by the Board of Directors. Information on the Group´s financial situation is published via interim reports and financial statement bulletins. In the Group financial statements published in the annual report, the main principles of preparation of these financial statements are described.
The audit shall be performed by an authorised firm of auditors. The parent company is responsible for selecting the audit firm. The audit firm selected by PKC Group has overall responsibility for coordination of audits for the whole group (audit plans for each group company) and their cost, together with the CFO of PKC Group Plc and the management of the subsidiaries. Moreover, if required, a local authorised audit firm can be selected to carry out the audit required by local legislation with the prior approval by the CFO.
Information and communication
The company´s Board of Directors defines the guidelines of communications and decides on the dates and content of the publication of matters falling within the scope of regular disclosure obligations as well as on the publication of significant matters falling within the scope of continuous disclosure obligations. As part of its regular disclosure obligations, the company publishes interim reports concerning the first three, six and nine months of the financial year, a financial statements bulletin and its financial statements as well as an Annual Report. The fundamental premise of the disclosure obligation is to ensure that all market parties are provided with sufficient, accurate and identical information on securities and their issuers at the same time.
As a form of internal communication the Group uses intranet pages, where all the Group-level guidelines of any significance can be found, and also the unit-specific intranet pages show the guidelines that concern a given unit. Also, the most essential guidelines for financial management can be seen on the company intranet pages. For all guidelines of any significance, training plans shall be prepared whose implementation is monitored. Executive board members and other senior management thereof ensure that information is transferred in their units so that each knows the operating procedures relating to his/her duties and so that the other information required for performance of tasks is supplied to the personnel.
The effectiveness of financial reporting, internal control and risk management is continually monitored as part of the daily management of the Group. The Board of Directors, the Audit Committee, the President & CEO, the CFO and the Group Executive Board, and the Group companies participate in the internal control of financial reporting via monitoring of monthly financial reports and regular forecasts and via reviews of processes and external auditor´s reports.
The financial department and external auditor hold regular meetings where the areas of focus for the inspections are chosen.