The highest decision-making power in Kesko is exercised by the Company's shareholders at the Company's General Meeting. At the Annual General Meeting, the Company’s shareholders elect the Company’s Board of Directors and the Auditor. Kesko Group is managed by the Board of Directors and the Managing Director, who is the President and CEO. The President and CEO is appointed by the Board of Directors. The Company uses a so-called one-tier governance model.
The Annual General Meeting is held annually by the end of June, on a date designated by the Company's Board of Directors. The most significant matters falling within the decision-making power of the General Meeting include the election of the Board members and the Auditor, the adoption of the financial statements, the resolution on discharging the Board members and the Managing Director from liability, and the resolution on the distribution of the Company's assets, such as distribution of profit.
The Company has share series A and B, which differ with respect to the number of votes attached to the shares. An A share carries ten (10) votes and a B share carries one (1) vote at the General Meeting. When votes are taken, the proposal for which more than half of the votes were given will usually be the resolution of the General Meeting, as prescribed by the Limited Liability Companies Act.
Shareholders are invited to attend the General Meeting by a Notice of the General Meeting published on the Company’s website. The notice of the meeting and other General Meeting documents, including the Board of Directors’ proposals to the General Meeting, are made available to shareholders no later than three weeks prior to the General Meeting at the Company's headquarters and on its website at www.kesko.fi. The notice of the meeting is also published in a stock exchange release.
The Company aims for all members of Kesko's Board of Directors, the President and CEO, and the Auditor to be present at the Annual General Meeting. The minutes of the General Meeting are made available to shareholders at www.kesko.fi within two weeks of the General Meeting. The resolutions of the General Meeting are also published in a stock exchange release without delay after the meeting.
According to the Articles of Association, the term of office of a Kesko Board member is three (3) years, starting at the close of the General Meeting electing the member and expiring at the close of the third (3rd) Annual General Meeting after the election.
According to the Articles of Association, Kesko's Board of Directors is composed of a minimum of five (5) and a maximum of eight (8) members. All Board members are elected by the General Meeting. There are no special procedures concerning the nomination of Board member candidates or their election at the General Meeting, as the number of Board members is resolved and the members are elected by majority votes at the General Meeting based on shareholders’ proposals. The Board elects the Chairman and the Deputy Chairman from among its members for the whole term of office of the Board.
In the preparation of the proposal for the Board composition, Kesko applies a practice in which significant shareholders prepare to the General Meeting the proposals concerning the Board of Directors, including the proposal for the number of Board members, the proposal for the remuneration of the Board members, and when necessary, the proposal for the Board members.
The Annual General Meetings of 13 April 2015, 4 April 2016, and 3 April 2017 resolved that the Board of Directors is composed of seven (7) members.
In 2017, the Board members were Esa Kiiskinen (Chairman), Mikael Aro (Deputy Chairman), Jannica Fagerholm, Matti Kyytsönen, Matti Naumanen, Anu Nissinen and Toni Pokela. The Board members were elected by the General Meeting held on 13 April 2015, except for Fagerholm and Naumanen, who were elected by the General Meeting of 4 April 2016 to replace resigned Board members Tomi Korpisaari and Kaarina Ståhlberg.
In accordance with the Articles of Association, the term of office of the current members of the Board of Directors will expire at the close of the 2018 Annual General Meeting.
The Board’s composition and shareholdings as at 31 December 2017 are presented in the table below.
|Board of Directors' composition and shareholdings as at 31 Dec. 2017|
|Name||Year of birth||Education||Principal occupation||Board member since||Committee membership||Kesko shares held as at 31 Dec. 2017|
|Esa Kiiskinen (Chair)||1963||Business College Graduate||Food retailer||2009||Remuneration Committee (Chair)||1,350 A shares held by him and 106,000 A shares held by companies controlled by him|
|Mikael Aro (Deputy Chair)||1965||eMBA||Senior industry adviser, Triton-Partners||2015||Audit Committee (Deputy Chair)
Remuneration Committee (Deputy Chair)
|1,000 B shares held by him|
|Jannica Fagerholm||1961||Master of Science (Econ.)||Managing Director, Signe and Ane Gyllenberg Foundation||2016||Audit Committee (Chair)||None|
|Matti Kyytsönen||1949||Master of Science (Econ.)||Chairman of the Board, Silverback Consulting Oy||2015||Audit Committee||995 B shares held by him|
|Matti Naumanen||1957||Trade Technician||Retailer||2016||2,400 A shares held by him and 17,664 A shares held by companies controlled by him|
|Anu Nissinen||1963||Master of Science (Econ.)||CEO, Digma Design Oy||2015||Remuneration Committee||None|
|Toni Pokela||1973||eMBA||Food retailer||2012||179,400 A shares held by companies controlled by him|
All members of Kesko's Board of Directors are non-executive directors. The Board evaluates the independence of its members on a regular basis in accordance with Recommendation 10 of the Corporate Governance Code.
In 2017, the Board carried out an independence evaluation in its organisational meeting held after the General Meeting of 3 April 2017. Based on that independence evaluation, the Board considered Toni Pokela not to be independent of the Company's significant shareholder, the K-Retailers’ Association, of which Pokela is the Chairman of the Board. In its independence evaluation, the Board considered the majority of the Board members to be independent of the Company. A Board member is obliged to provide the Board with necessary information for the evaluation of independence.
The Board members’ independence is depicted in the table below.
|Board members’ independence in 2017|
|Independent of the Company||Independent of a significant shareholder|
|Esa Kiiskinen (Chair)||No*||Yes|
|Mikael Aro (Deputy Chair)||Yes||Yes|
|* Companies controlled by Kiiskinen, Naumanen and Pokela each have a chain agreement with Kesko Corporation.|
|** Pokela is the Chairman of the Board of Kesko's significant shareholder, the K-Retailers’ Association.|
Kesko's Board of Directors is responsible for the proper organisation of the Company's corporate governance, operations, accounting and financial management controls. It is also responsible for the supervision and control of the whole Kesko Group. The Board of Directors has confirmed a written charter for the Board of Directors’ duties, the matters it deals with, its meeting practice and its decision-making procedure. In accordance with the charter, the Board deals with and makes decisions on matters that are financially, operationally or fundamentally significant to the Group.
According to the charter, the Board of Directors’ main duties include:
The duty of Kesko's Board of Directors is to promote the interests of Kesko and all of its shareholders. The Board members do not represent the parties in the Company that have proposed their election as Board members. A Board member is disqualified from participating in the handling of any matter between him/her (including entities over which he/she exercises control) and the Company. When a vote is taken, the Board's decision will be the opinion of the majority and if a vote results in a tie, the decision will be the opinion supported by the Chair. If the votes taken at an election of a person end in a tie, the result will be decided by drawing lots.
In 2017, the Board held 10 meetings. The Board members' attendance rate at the Board meetings was 100%. The Board meetings regularly discuss the review by the President and CEO on key topical issues, as well as the reports by the Chairmen of the Board's Audit Committee and Remuneration Committee on Committee meetings preceding the Board meetings. The Auditor presents their findings to the Board once a year in connection with the review of the financial statements.
As in previous years, in 2017, the Board reviewed the financial reports and monitored the Group's financial situation, approved the most significant capital expenditure and divestments and new financing arrangements, monitored the progress of Group-level projects and approved the interim reports, the half year financial report and the financial statements before they were published.
In 2017, the Board monitored the implementation of the new Kesko Group strategy approved in the spring of 2015, further clarified and concretised the chosen strategic policy definitions and made decisions on corporate arrangements in line with the approved strategy, such as the divestments of Indoor Group Ltd, minority holdings in the Baltic machinery trade subsidiaries, and the K-maatalous business. The Board monitored the financial performance of previously made acquisitions and their integration into Kesko Group. In order to improve profitability and ensure competitiveness, the Board has made sure that the planned cost saving targets are met. Moreover, the Board, for example, reviewed Kesko’s Annual Report, the results of the K Voices personnel survey, and goodwill impairment testing; decided on the establishment of a new share-based compensation scheme; and approved Kesko Group’s Risk Management Policy, insurance principles, the Group’s Treasury and investment policy, and real estate strategy.
The Board carried out a self-assessment, conducted via discussions between the Board, the Chairman and each Board member based on a predetermined discussion agenda. Topics covered in the assessment included Group strategy, reporting, risk management, efficiency of Board and Committee work, Group management and contingency planning for Group management, and individual Board member assessments. The Board reviewed a summary of the discussion results in its meeting. Special attention was paid to e.g. the practical implementation of the confirmed strategy throughout the organisation, closer monitoring of strategy implementation, and more extensive handling of risk management issues by the Board. In addition to the summary, each Board member received personal feedback.
|Attendance at meetings by members of the Board and its Committees in 2017|
|Board member since||Committee membership||Board||Audit Committee||Remuneration Committee|
|Esa Kiiskinen (Chair)||2009||Remuneration Committee (Chair)||10/10||3/3|
|Mikael Aro (Deputy Chair)||2015||Audit Committee (Deputy Chair)||10/10||5/5|
|Remuneration Committee (Deputy Chair)||10/10||3/3|
|Jannica Fagerholm||2016||Audit Committee (Chair)||10/10||5/5|
|Matti Kyytsönen||2015||Audit Committee||10/10||5/5|
|Anu Nissinen||2015||Remuneration Committee||10/10||3/3|
The diversity policy approved by Kesko’s Board of Directors is available at https://kesko.fi/en/investor/corporate-governance/board-and-its-committees/diversity-policy. The diversity policy has been approved and published on the website in the following form:
“Diversity is an essential component of Kesko’s success, the achievement of Kesko’s strategic objectives and good governance at Kesko. This diversity policy describes the objectives in the achievement of diversity in the operations and composition of Kesko Corporation’s Board of Directors.
According to the Articles of Association, the term of office of a Kesko Board member is three (3) years, starting at the close of the General Meeting electing the member and expiring at the close of the third (3rd) Annual General Meeting after the election. According to the Articles of Association, Kesko's Board of Directors is composed of a minimum of five (5) and a maximum of eight (8) members. A sufficient number of Board members promotes the diversity of the Board composition, as the areas of expertise and competencies of the Board members are mutually complementary and the Board’s independence requirements are satisfied.
The Board members are elected by majority votes at the General Meeting based on shareholders’ proposals. The Board elects the Chairman and the Deputy Chairman from among its members for the whole term of office of the Board. In the preparation of the proposal for the Board composition, Kesko applies a practice in which significant shareholders prepare to the General Meeting the proposals concerning the Board of Directors, including the proposal for the number of Board members, the proposal for the remuneration of the Board members, and when necessary, the proposal for the Board members.
The composition of Kesko’s Board of Directors shall support Kesko’s current and future business operations. The Board members are appointed on their merits. One of the essential features in the Board composition is that the Board members’ educational backgrounds, experience, professional competencies and age and gender distribution support Kesko’s business objectives and enable efficient Board work for Kesko. The Board members shall also be able to devote a sufficient amount of time to Board work.
Kesko aims to achieve a balanced gender distribution in the composition of its Board of Directors. The composition of the Board shall reflect experience in both national and international business operations. The educational background of the Board members shall represent multiple disciplines and diversity. In addition, Kesko’s Board shall include members with strong experience in the trading sector and in-depth knowledge of the retailer business. The achievement of objectives is monitored annually and reported in the corporate governance (CG) statement.”
In 2017, two of the seven Board members were women, in other words, the proportion of the gender with smaller representation in the Board was approximately 29%. The Board members have diverse and multi-sectoral experience backgrounds and several Board members also have experience in international business. The Board members’ educational background is multi-sectoral and diverse (see the descriptions in section ”Board of Directors’ composition and shareholdings”). Several Board members have experience in the trading sector and the principal occupation of three of the seven Board members is acting as a K-retailer.
Kesko has a Board’s Audit Committee and Remuneration Committee, both of which are composed of three (3) Board members. At the close of the Annual General meeting, the Board elects from among its members the Committee Chairmen, Deputy Chairmen and members for one year at a time.
All members of the Audit Committee are independent of the Company and the Company’s significant shareholders. In the election of the Audit Committee members, the competence requirements for Audit Committee members have been taken into account.
All members of the Remuneration Committee are independent of the Company's significant shareholder and its majority is also independent of the Company. In the election of the Remuneration Committee members, the competence requirements for Remuneration Committee members have been taken into account.
The Committees regularly assess their operations and working methods and carry out a related self-assessment once a year. The Board has confirmed written charters for the Committees, which contain the main duties and operating principles of the Committees.
The Committees have no independent decision-making power. Instead, the Board makes decisions on matters based on the Committees’ preparatory work. The Committee Chairman reports on the Committee's work at the Board meeting following the Committee's meeting. The Committee Chairman reports on the Committee's work at the Board meeting following the Committee's meeting. Minutes of the Committee meetings are submitted for the information of the Board members.
Kesko's Board of Directors has not established any other committees in addition to the Audit and Remuneration Committees. Nor has the General Meeting appointed any committees or boards.
The Board's organisational meeting, held after the Annual General Meeting of 3 April 2017, elected the following Board members as Audit Committee members:
According to its charter, the duties of the Audit Committee include:
In 2017, the Audit Committee held five meetings. Its members' attendance rate at the Committee meetings was 100%. At the Committee meetings, the Group's Chief Financial Officer, the Group Controller and the Chief Audit Executive regularly report on their areas of responsibility to the Committee. The Committee also receives reports on Kesko Group's funding situation, taxation, information management, risk management and insurances. The Auditor is present at the Committee meetings and presents their audit plan and report to the Audit Committee.
During the year, the Committee reviewed the reports on the Group's financial situation, including the financial statements release, the half year financial report and the interim reports and updated forecasts, and made a recommendation to the Board on the review of the reports and the financial statements release. The Committee reviewed the reports of the Group's external and internal audits and risk management and the Corporate Governance Statement. The Audit Committee also reviewed the reporting of non-financial information, the organisation of Group risk management and internal audit, goodwill impairment testing, changes to the presentation of financial statements, and Group risk reporting in the financial statements.
The Committee monitored the implementation of the audit plan for internal audit, the Group’s preparation for the implementation of new IFRS standards and their impact on the Group’s reporting, the progress made in the cyber security development plan, the Group’s preparations for the implementation of the new EU general data protection regulation, and additional services purchased from firms of auditors. The Committee also assessed the Auditor's independence and consultation services provided to the Group. The Audit Committee prepared and submitted a proposal to Kesko’s Annual General Meeting 2017 for the election of Auditor.
The Audit Committee prepared proposals to the Board for updates to Kesko Group’s risk management policy and insurance principles, and for the Group’s treasury and investment policy. The Committee approved the operating instructions and the 2018 audit plan, personnel resources and budget for the Group’s Internal Audit.
The Audit Committee assessed its operations as part of the Board’s self-assessment Topics that emerged the assessment included more in-depth reporting on units with lower profitability, and the distribution of the Committee’s time between financial reporting and other matters to be discussed.
The Board's organisational meeting, held after the Annual General Meeting of 3 April 2017, elected the following Board members as Remuneration Committee members:
According to its charter, the duties of the Remuneration Committee include:
In 2017, the Remuneration Committee held 3 meetings. Its members' attendance rate at the Committee meetings was 100%. The Committee prepared, among other things, proposals to the Board for Kesko’s new share-based compensation scheme, for the performance criteria and target group of share awards, for the principles of Group performance bonuses for 2018, as well as for the performance bonuses to be paid for 2016 for the President and CEO and Group Management Board members in charge of business lines The Committee monitored and assessed the implementation of the reform of management’s total remuneration. In addition, the Committee discussed, among other things, Kesko’s Remuneration Statement. The Remuneration Committee assessed its operations as part of the Board’s self-assessment, and based on the assessment, decided to focus more on management contingency planning and competency requirements.
Kesko has a managing director who is the President and CEO. Kesko’s President and CEO is Master of Science in Technology Mikko Helander (b. 1960). He became Kesko’s President and CEO on 1 January 2015. Helander has also been a member of the Group Management Board and Kesko’s Executive Vice President during the period 1 October 2014 to 31 December 2014, and he has been the Chairman of the Group Management Board since 1 January 2015.
The President and CEO's duty is to manage Kesko Group’s operations in accordance with the instructions and orders issued by the Company’s Board of Directors and to report to the Board developments in the Company's business operations and financial situation. He is also responsible for the Company's day-to-day governance and he oversees that the financial matters are organised in a reliable manner. The President and CEO also chairs the Group Management Board.
The President and CEO is elected by the Board of Directors. The Board has decided the terms and conditions of the President and CEO's service contract. A written managing director's service contract, approved by the Board, has been made between the Company and the President and CEO.
As at 31 December 2017, Helander held a total of 36,091 Kesko B shares. Helander’s shareholdings as at 31 December 2017 are also presented in the table under “Group Management Board”.
Kesko Group has a Group Management Board, the Chairman of which is Kesko's President and CEO. The Group Management Board does not have any powers under law or the Articles of Association. The Group Management Board’s duty is to discuss Group-wide development projects and Group-level policies and procedures. In addition, the Group Management Board discusses, among other things, the Group's and the division parent companies' business plans, profit performance and matters dealt with by Kesko's Board of Directors, in whose preparation it also participates. The Group Management Board meets 12–18 times a year.
|Group Management Board members, areas of responsibility and shareholdings as at 31 Dec. 2017|
|Group Management Board member since||Area of responsibility||Shares held as at 31 Dec. 2017|
|Mikko Helander, Chairman||10/01/14||Kesko's President and CEO||36,091 B shares held by him|
|Jorma Rauhala, President of building and technical trade division, Deputy to President and CEO*||02/05/13||Building and technical trade||20,564 B shares held by him|
|Ari Akseli, President of grocery trade division**||11/15/17||Grocery trade||7,568 B shares and 81 A shares held by him|
|Johan Friman, CEO of VV-Auto Group Oy||01/01/17||Car trade||None|
|Jukka Erlund, Executive Vice President, Chief Financial Officer||11/01/11||Finance and accounting||16,840 B shares held by him|
|Matti Mettälä, Executive Vice President||10/01/12||Human resources||10,782 B shares held by him|
|Anne Leppälä-Nilsson, Executive Vice President***||01/01/15||Legal affairs||12,013 B shares held by her|
|Lauri Peltola, Executive Vice President****||03/02/15||Corporate responsibility,
communications and stakeholder relations
|6,500 B shares held by him|
|Anni Ronkainen, Executive Vice President||04/20/15||Chief Digital Officer||6,500 B shares held by her|
|*Rauhala was appointed President of Kesko's building and technical trade division and deputy to the President and CEO on 15 November 2017. Previously, Rauhala acted as President of Kesko’s grocery trade division. Rauhala’s predecessor Terho Kalliokoski left Kesko on 15 November 2017, at which time Kalliokoski held a total of 30,903 Kesko B shares.|
|** Akseli was appointed President of Kesko’s grocery trade division on 15 November 2017. His predecessor Jorma Rauhala was appointed President of Kesko’s building and technical trade division and deputy to Kesko’s President and CEO on 15 November 2017.|
|***Mika Majoinen was appointed Kesko Group General Counsel as of 1 January 2018. Anne Leppälä-Nilsson retired on 31 December 2017, in accordance with her contract.|
|****Lauri Peltola’s membership on the Group Management Board ended on 31 October 2017.|