Finnish Corporate Governance Code

Finnish Corporate
Governance Code
2010
Finnish Corporate Governance Code
N.B. This is an unofficial translation. In case of any discrepancy between the Finnish version
and the English version, the Finnish version shall prevail.
Securities Market Association

15 June 2010
SECURITIES MARKET ASSOCIATION AND CORPORATE GOVERNANCE IN FINLAND
The Securities Market Association is a cooperation body established in December 2006 by the Confederation of Finnish Industries
EK, the Central Chamber of Commerce of Finland and NASDAQ OMX Helsinki Ltd (hereinafter “Helsinki exchange”). The aim
of the association is to ensure, through more efficient self-regulation, that companies operating in the securities market observe
uniform and transparent operating principles and rules. The mission of the association is, among others, to promote good Corporate
Governance and to administer the Finnish Corporate Governance Code (hereinafter the “Code”).
Corporate Governance practices develop constantly. The Securities Market Association monitors domestic and international deve-
lopment and updates the Code when necessary. For additional information about the association, see www.cgfinland.fi.
Corporate Governance working group
In June 2009, the Board of the Securities Market Association appointed a working group to update the Code regarding recommen-
dations on remuneration of directors. The need to update the Code resulted from the changes that took place in the capital market in
connection with the financial crisis as well as the development of regulation on remuneration of directors, above all the Commission
recommendation on the remuneration of directors of listed companies issued on 30 April 2009. The working group was also given
the task to find out if the implementation of the directive on the exercise of certain rights of shareholders in the Finnish Limited
Liability Companies Act gave rise to amendments to the Code.
Pekka Merilampi, Lagman, was Chairman of the working group.

The other members were
Ilona Ervasti-Vaintola, Group Chief Counsel, Group Executive Vice President,
Anne Leppälä-Nilsson, Group General Counsel, Vice President
Leena Linnainmaa, Director,
Timo Löyttyniemi, Managing Director,
Harri Pynnä, General Counsel,
Outi Raekivi, General Counsel,
Jaakko Raulo, Assistant General Counsel,
Hannu Rautiainen, General Counsel,
Timo Ritakallio, Deputy CEO, and
Kaarina Ståhlberg, Assistant General Counsel.
The secretariat of the working group consisted of Anne Horttanainen, Legal Counsel, Anna Santti, Legal Counsel, and Hannu
Ylänen, Advisor.
The working group convened 16 times and prepared proposals for amendments to the Code, in accordance with its assignment. The
group also heard authorities, experts and various market parties extensively. In addition, the working group publicly requested for
comments and received more than 20 comments.
The Board of the Securities Market Association has issued this Corporate Governance Code in June 2010. The Code will replace the
Corporate Governance Code issued in 2008.
History of the Code
Corporate Governance Code of 2008
In October 2008, the Board of the Securities Market Association issued a Corporate Governance Code, which replaced the Corpo-
rate Governance Recommendation for Listed Companies issued in 2003. The new Code took into account changes in regulation
and international development. The Code improved the opportunities of international investors to get information on the Finnish
Corporate Governance system as a whole and, above all, the rights of shareholders.
The Chairman of the working group that prepared the Code was Anne Leppälä-Nilsson, General Counsel, Legal Affairs.
The members of the working group were Ilona Ervasti-Vaintola, Group Chief Counsel, Group Executive Vice President, Jyrki
Kurkinen, Senior Vice President, Legal Affairs, Leena Linnainmaa, Director, Timo Löyttyniemi, Managing Director, Jaakko
Raulo, Assistant General Counsel, and Kaarina Ståhlberg, Assistant General Counsel. Tytti Peltonen, Chief Policy Advisor, was
permanent advisor to the working group.
The secretariat of the working group consisted of Anne Horttanainen, Legal Counsel, Anna Santti, Legal Counsel, Sanna Suni,
Legal Counsel, Ari Syrjäläinen, Legal Counsel, and Piia Vuoti, Advisor.
2 Finnish Corporate Governance Code 2010

Corporate Governance Recommendation for Listed Companies of 2003
In December 2003, Hex Plc (at present NASDAQ OMX Helsinki Ltd), the Central Chamber of Commerce and the Confederation
of Finnish Industry and Employers (at present the Confederation of Finnish Industries EK) issued a Corporate Governance Recom-
mendation for Listed Companies. The recommendation greatly increased the openness of Finnish listed companies and included,
among others, a recommendation on the independence of directors.
The Chairman of the working group that prepared the recommendation was Pekka Merilampi, Lagman.
The members of the working group were Lars Blomqvist, B.Sc. (Econ.), APA, Ilona Ervasti-Vaintola, Chief Counsel, Executive
Vice President, Jyrki Kurkinen, Senior Vice President, Legal Affairs, Anne Leppälä-Nilsson, Vice President, Legal Affairs El-
mar Paananen, Executive Vice Chairman Ursula Ranin, Vice President, General Counsel, Jukka Ruuska, President, and Matti
Vuoria, Executive Chairman.
The secretaries of the working group were Jaakko Raulo, Director, Tiina Kairinen, Legal Counsel, and Leena Linnainmaa,
Deputy Director.
Corporate Governance Recommendation by the Central Chamber of Commerce and the Confederation of Finnish Industry
and Employers of 1997
The first Corporate Governance recommendation in Finland was issued in February 1997 by the Central Chamber of Commerce
and the Confederation of Finnish Industry and Employers (at present the Confederation of Finnish Industries EK). The aim was
to clarify the practices applied by Finnish companies and provide investors with better information on the Corporate Governance
practices applied by companies.
The Chairman of the working group that prepared the recommendation was Juhani Erma, Managing Director.
The members of the working group were Lars Blomqvist, B.Sc. (Econ.), APA, Ari Heiniö, Managing Director, Ahti Hirvonen,
PhD (Econ.) h.c., Olli-Pekka Kallasvuo, Director, Ilmo Korpelainen, Legal Counsel, Timo Lehto, Legal Counsel, Pekka Me-
rilampi, Attorney-at-law, Heikki Niskakangas, Professor, Markku Talonen, Managing Director, and Matti Vuoria, Secretary
General.
The secretaries of the working group were Marianna Uotinen-Tarkoma, Master of Laws, and Petri Vainio, Master of Laws.
Finnish Corporate Governance Code 2010

ISBN 978-952-5620-47-4
Finnish Corporate Governance Code 2010 3

CONTENTS
1. INTRODUCTION .................................................................................................................................... 6
Aims of the Code................................................................................................................................................. 6

Structure of the Code.......................................................................................................................................... 6
Application of the Code....................................................................................................................................... 6
Comply or Explain principle ............................................................................................................................... 6
Shareholder’s rights............................................................................................................................................ 6
Governance model.............................................................................................................................................. 7
2. GENERAL MEETING.............................................................................................................................. 8
Recommendation 1 - Information on general meetings to shareholders............................................................ 8

Recommendation 2 - Organisation of the general meeting................................................................................. 9
Recommendation 3 - Attendance of the board of directors, managing director and
auditor at a general meeting............................................................................................. 9
Recommendation 4 - Attendance of a prospective director at a general meeting.............................................. 9
3. BOARD ................................................................................................................................................ 10
Recommendation 5 - Charter of the board........................................................................................................ 10

Recommendation 6 - Meetings of the board..................................................................................................... 10
Recommendation 7 - Performance evaluation of the board.............................................................................. 10
Recommendation 8 - Election of directors........................................................................................................ 10
Recommendation 9 - Number, composition and competence of the directors.................................................. 10
Recommendation 10 - Term of the directors..................................................................................................... 11
Recommendation 11 - Informing the shareholders of director candidates........................................................ 11
Recommendation 12 - Special order of appointment of the directors............................................................... 11
Recommendation 13 - Right of the board to receive information...................................................................... 11
Independence of directors................................................................................................................................. 11
Recommendation 14 - Number of independent directors ................................................................................ 11
Recommendation 15 - Evaluation of independence......................................................................................... 12
Recommendation 16 - Information reported on directors.................................................................................. 13
Recommendation 17 - Obligation of directors to provide information............................................................... 13
4. BOARD COMMITTEES........................................................................................................................ 13
Recommendation 18 - Establishment of a committee....................................................................................... 13

Recommendation 19 - Reporting by a committee to the board......................................................................... 14
Recommendation 20 - Charter of a committee................................................................................................. 14
Recommendation 21 - Committee meetings..................................................................................................... 14
Recommendation 22 - Appointment of members to the committees................................................................ 14
Recommendation 23 - Describing the composition of a committee.................................................................. 14
Audit committee................................................................................................................................................ 14
Recommendation 24 - Establishment of the audit committee........................................................................... 14
Recommendation 25 - Members of the audit committee.................................................................................. 14
Recommendation 26 - Independence of the members of the audit committee................................................ 15
Recommendation 27 - Duties of the audit committee....................................................................................... 15
Nomination committee...................................................................................................................................... 15
Recommendation 28 - Establishment of the nomination committee................................................................. 15
Recommendation 29 - Members of the nomination committee......................................................................... 15
Recommendation 30 - Duties of the nomination committee............................................................................. 16
Remuneration committee.................................................................................................................................. 16
Recommendation 31 - Establishment of the remuneration committee............................................................. 16
Recommendation 32 - Members of the remuneration committee..................................................................... 16
Recommendation 33 - Duties of the remuneration committee.......................................................................... 16

5. MANAGING DIRECTOR....................................................................................................................... 17
Recommendation 34 - Managing director’s service contract............................................................................ 17

Recommendation 35 - Information on the managing director........................................................................... 17
Recommendation 36 - Managing director and chairman of the board.............................................................. 17
6. OTHER EXECUTIVES ......................................................................................................................... 18
Recommendation 37 - Management organisation............................................................................................ 18

Recommendation 38 - Information on the members of the management team................................................ 18
7. REMUNERATION................................................................................................................................. 18
Principles of remuneration and the decision-making process........................................................................... 18

Recommendation 39 - Principles applied to remuneration schemes ............................................................... 18
Recommendation 40 - Decision-making process ............................................................................................ 19
Remuneration of the board of directors ........................................................................................................... 19

Recommendation 41 - Remuneration and other benefits of the directors ....................................................... 19
Recommendation 42 - Payment of the remuneration of the directors in shares............................................... 19
Recommendation 43 - Participation of the directors in a share-based remuneration scheme......................... 20
Recommendation 44 - Information on share and share-based remuneration of directors................................ 20
Remuneration of the managing director and other executives.......................................................................... 20
Recommendation 45 - Principles for the remuneration schemes of the managing director and
other executives............................................................................................................ 20
Recommendation 46 - Information on the service contract of the managing director....................................... 20
Information on remuneration............................................................................................................................. 21
Recommendation 47 - Remuneration Statement.............................................................................................. 21
8. INTERNAL CONTROL, RISK MANAGEMENT AND INTERNAL AUDIT............................................ 22
Recommendation 48 - Operating principles of internal control......................................................................... 22

Recommendation 49 - Organisation of risk management................................................................................. 22
Recommendation 50 - Internal audit................................................................................................................. 22
9. INSIDER ADMINISTRATION................................................................................................................ 23
Recommendation 51 - The company’s insider administration.......................................................................... 23
10. AUDIT ................................................................................................................................................ 24
Recommendation 52 - Information on auditor candidates................................................................................ 24

Recommendation 53 - Auditor’s fees and fees for non-audit services.............................................................. 24
11. COMMUNICATIONS........................................................................................................................... 25
Recommendation 54 - Corporate Governance Statement................................................................................ 25
Investor information on the company website................................................................................................... 26

Recommendation 55 - Investor information on the company website.............................................................. 26
12. EFFECTIVE DATE.............................................................................................................................. 28

1. INTRODUCTION Most recommendations apply to the parent company of a group.
It should, however, be noted that many recommendations on su-
pervision, control, reporting and disclosure of information, in-
Aims of the Code cluding explanations, cover the entire group of a company. Some
items of the Code mention the group or companies belonging
The aim of the Code is that Finnish listed companies apply cor- to the group separately in order to clarify the recommendation.
porate governance practices that are of a high international stan-
dard. The Code will harmonise the practices of listed companies
as well as the information given to shareholders and other inves-
tors. It will also improve the transparency of administrative bo- Comply or Explain principle
dies, management remuneration and remuneration policies. The
Code also provides an overall picture of the central principles of The Code has been prepared in accordance with the so-called
the corporate governance system of Finnish listed companies. Comply or Explain principle. This means that the company shall
Good corporate governance will enhance the success of Finnish comply with all recommendations of the Code. A company may
listed companies. depart from an individual recommendation, however, but in this
case, it must disclose such a departure and provide an explana-
The ownership structures, areas of business and extent of operation for doing so. The company complies with the Code even if
tions of listed companies vary. There are also differences in the it departs from an individual recommendation, provided that the
governance structures of listed companies. Most Finnish listed company discloses and explains the departure. A company must
companies are medium or small-sized companies in internatio- disclose that it complies with this Code, and provide information
nal terms. The level of foreign shareholding in Finnish listed on any departures as well as their explanations on its website and
companies is one of the highest in Europe. in its annual Corporate Governance Statement (see recommen-
dation 54).
The corporate governance system of Finnish listed companies
is based on Finnish legislation, and this Code complements the The Comply or Explain principle gives the company more fle-
statutory procedures. xibility in the application of the Code. The company may depart
from an individual recommendation of the Code due to, e.g. the
ownership or company structure or the special characteristics
of its area of business. A clear and extensive explanation will
Structure of the Code consolidate the trust in the decision made by the company and
make it easier for the shareholders and investors to evaluate the
Section 1 presents the goals, structure and scope of application departure.
of the Code and a general description of the rights of sharehol-
ders based on law. Sections 2 to 11 present the individual recom-
mendations and section 12 deals with the entry into force. Several recommendations of this Code are based on legis-
lation or other regulation. A company may not depart from
The section introductions present the general principles concer- the recommendations as far as they describe the obligations
ning the subject matter of each section. The recommendations set by compulsory regulation. The Rules of the Helsinki
are presented in bold text and numbered in sequence. Any de- exchange also contain obligations related to good gover-
parture from the recommendation and its justifications must be nance practices of listed companies, above all regarding
disclosed. Each recommendation is followed by an explanatory disclosure of information to the public.
section, including the justifications of the recommendation as
well as aspects that describe and specify the recommendation.
The Code uses the terms “disclose”, “report” and “make avai- Shareholder’s rights
lable” to describe the dissemination of information to sharehol-
ders. Unless otherwise provided, the company shall present the The Finnish Limited Liability Companies Act contains provi-
information on the company website in all such cases. The term sions on share-related rights, e.g. exercising voting rights, the
disclosure to the public means the distribution of information in shareholder’s right to ask questions, the right of shareholders
the form of a stock exchange release. to put items on the agenda of a general meeting, as well as on
participation in a general meeting and the way of giving notice
of a general meeting.
Application of the Code The Act also contains the requirement on the equal treatment of
shareholders. All shares carry equal rights in a company, unless
The Code is aimed at companies listed on the Helsinki exchan- otherwise provided in the articles of association. The general
ge, provided that it is not in conflict with compelling regulations meeting, board of directors and managing director do not have
applicable in the domicile of the company. In the recommenda- the right to make a decision that could give undue benefit to a
tions, the term company is used for listed companies. shareholder or another person at the expense of the company or
another shareholder.

The main purpose of the principle of equal treatment is to protect Voting rights and forms of decision-making
minority shareholders. Compliance with the principle does not
prevent the use of majority rule, but it prevents favouring majo- At a general meeting, a shareholder may exercise all the votes
rity shareholders at the expense of other shareholders. carried by the shares that he or she held on the record date of
the general meeting. The articles of association of some listed
The ownership structure of Finnish listed companies varies; in companies have, however, stipulations that restrict voting rights.
some companies, the ownership structure is decentralised, whi- The shareholder may vote with different shares in a different
le other companies have shareholders with significant voting manner, unless the articles of association stipulate otherwise.
rights. In matters within the competence of the general meeting, A shareholder may also vote with only part of his or her shares.
it may be in the interest of the company and all its shareholders
that the board is aware of the opinion of shareholders with signi- One share shall carry one vote in all matters that the general
ficant voting rights on a matter under preparation for the general meeting deals with. However, the articles of association may
meeting. In such cases, e.g. insider regulations must be taken state that different shares of the company carry different voting
into consideration. rights.
The decisions of a general meeting shall be made by majority or

Convocation of the general meeting by qualified majority, in accordance with applicable law and the
articles of association.
The board shall convene the general meeting. The annual general
meeting must be held within six months of the end of the finan-
cial period. An extraordinary general meeting must be convened if Shareholder’s right to ask questions and right to
shareholders with at least 10 % of the shares so demand in writing table draft resolutions
in order to deal with a given issue.
At a general meeting, every shareholder has the right to ask
questions related to an item on the agenda of the meeting. The
Right to put items on the agenda of the shareholder may send the question to be submitted to the mee-
general meeting ting to the company in advance. A shareholder also has the right
to table draft resolutions at the meeting in matters that fall wit-
A shareholder has the right to put on the agenda of the gene- hin the competence of the general meeting and that are on the
ral meeting items that fall within the competence of the general agenda.
meeting by virtue of the Limited Liability Companies Act, pro-
vided that the shareholder demands this of the board of directors
in writing, in sufficient time before the general meeting, so that Election of the board and auditor
the item can be added to the notice of the general meeting. The
demand is always deemed to have arrived in sufficient time, if The right to elect the directors and auditors at the general mee-
the board has been notified of the demand four weeks before the ting is one of the most important rights of the shareholders.
delivery of the notice of the general meeting at the latest.
Governance model
Proxy document and proxy representative
As a rule, Finnish listed companies use a so-called one-tier
A shareholder may authorise a proxy representative to act on his governance model, which, in addition to the general meeting,
or her behalf at a general meeting. If the shares are nominee- comprises the board of directors and the managing director. Ac-
registered, the proxy representative may be, e.g. the custodian cording to the Limited Liability Companies Act, a company may
bank. The proxy representative shall produce a proxy document also have a supervisory board. Very few listed companies have
or otherwise provide reliable evidence of the right to represent supervisory boards.
the shareholder.
A shareholder may have several proxy representatives, who

represent the shareholder with shares on different book-entry
accounts. When registering for the general meeting, the shares
on the basis of which each proxy representative represents the
shareholder must be declared.

2. GENERAL MEETING Draft resolutions to the general meeting are draft resolutions by
the board of directors and some other competent body as well as
draft resolutions by shareholders that fall within the competence
of the general meeting.
The shareholders exercise their decision-making power at the
general meeting. The company shall convene one annual general A shareholder has the right to put on the agenda of the gene-
meeting each financial period. An extraordinary general meeting ral meeting items that fall within the competence of the gene-
shall be convened when necessary. A shareholder may exercise ral meeting by virtue of the Limited Liability Companies Act.
his or her right to speak, ask questions and vote at the general The decision-making related to the notice of the meeting and the
meeting. practical measures related to the publication of the notice require
that the company has sufficient time to deal with the demands
of shareholders on items to be put on the agenda of the general
meeting. The company shall state well in advance on its website
Recommendation 1 - Information on general the date by which a shareholder must declare his or her demands.
meetings to shareholders By virtue of the Limited Liability Companies Act, such date may
not be earlier than four weeks prior to the delivery of the notice
of the meeting. In addition, the company shall, on its website,
Before a general meeting, sufficient information specify the mail or e-mail address to which a shareholder shall
on the items to be dealt with shall be made avai- send such a demand.
lable to the shareholders.
The notice of the general meeting shall contain at least the fol-
The notice of the general meeting shall include a lowing information:
proposal for the agenda of the meeting. • the name of the company, the time and place of the general
meeting
The notice of the general meeting and the follo- • the proposed agenda for the general meeting
wing information shall be made available on the • the proposals regarding the composition of the board of di-
company website at least three weeks before the rectors referred to in recommendation 11
general meeting: • the specific order according to which the board members
• the documents to be submitted to the general are to be appointed, if any, according to recommendation 12
meeting • the proposals referred to in recommendation 52 concerning
• draft resolutions to the general meeting. the auditor
• a mention of the procedures that a shareholder must comply
The company shall, well in advance, disclose on with in order to be able to participate and to vote at the
its website the date by which a shareholder shall general meeting
notify the board of directors of the company of an • a mention of the procedures that a shareholder must comply
issue that he or she demands to be included in the with in order to be able to participate in the general meeting
agenda of the annual general meeting. through a proxy holder
• a mention of a shareholder’s right to ask questions on issues
In addition, the minutes of the general meeting in- on the agenda of the general meeting
cluding the voting results and the appendices of • the date on which a shareholder entered in the shareholder
the minutes that are part of a decision made by the register has the right to participate in the general meeting
meeting, shall be posted on the company website and to vote (so-called record date of the general meeting)
within two weeks of the general meeting. • where the documents and draft resolutions of the general
meeting are available
The documents related to the general meeting, • the total number of company shares and the total number by
which are placed on the website, shall be available share class at the date of the convocation
on the company website at least for three months • the address of the company website.
after the general meeting.
As the minutes of a general meeting and the voting results are
presented on the company website, the shareholders who were
The advance information allows the shareholders to evaluate not present at the general meeting also obtain information on the
whether they wish to attend the general meeting, ask questions meeting and the voting results. However, the minutes and voting
at the meeting and decide how they intend to vote. Shareholders results presented on the company website shall not contain any
who will not attend the meeting can thus also obtain information lists of participants or voting instructions given by shareholders.
about the company. Recommendation 11 also deals with advan-
ce information.
The documents presented to the annual general meeting, which

are placed on the website, include, e.g. the financial statements,
the report by the board of directors, and the auditors’ report.

Recommendation 2 - Organisation of the general Recommendation 4 - Attendance of a prospecti-
meeting ve director at a general meeting
The general meeting shall be organised in a man- A person proposed for the first time as director
ner that permits shareholders to exercise their ow- shall participate in the general meeting that deci-
nership rights effectively. des on his or her election unless there are well-
founded reasons for the absence.
The general meeting shall be organised in such a manner that the

shareholders can participate in the general meeting as extensi- As a rule, a person proposed for the first time as director should
vely as possible. Especially in companies with an international attend the general meeting that decides on his or her election, in
ownership structure, the opportunities of shareholders to partici- order to be introduced to the shareholders.
pate in general meetings vary. The company shall use reasonable
means to promote the participation possibilities of shareholders.
The articles of association may stipulate that it is possible to par-
ticipate in the general meeting by post or telecommunications or
by other technical means. The board of directors may also make
this decision, unless it is otherwise provided in the articles of
association.
Recommendation 3 - Attendance of the board of

directors, managing director and auditor at a ge-
neral meeting
The chairman of the board of directors and a suf-

ficient number of members of the board and its
committees as well as the managing director shall
attend the general meeting. In addition, the auditor
shall be present at the annual general meeting.
The presence of members of the board of directors and its com-

mittees as well as the managing director at the general meeting is
necessary to guarantee interaction between the shareholders and
the management bodies of the company as well as the sharehol-
ders’ right to ask questions.
By exercising their right to ask questions, the shareholders can

obtain detailed information about matters that may have an im-
pact on the evaluation of the financial statements, the financial
position of the company or other issues on the agenda of the
general meeting. It is particularly important that the managing
director and the directors attend the annual general meeting. In
case of an extraordinary general meeting, it may be sufficient,
taking into account the nature of the issue to be dealt with, that
the managing director, the chairman of the board and only some
of the directors attend the meeting.
The presence of the auditor at the annual general meeting allows

the shareholders to ask the auditor for more detailed informati-
on on matters that may have an impact on the evaluation of the
financial statements or some other issue on the agenda of the
meeting.

3. BOARD Recommendation 7 - Performance evaluation of
the board
The board is responsible for the administration and the proper The board shall conduct an annual evaluation of
organisation of the operations of the company. The board super- its operations and working methods.
vises and controls the operative management of the company,
appoints and dismisses the managing director, approves the stra-
tegic goals and the principles of risk management for the compa- To ensure the efficiency of board work, the board shall evaluate
ny and ensures the proper operation of the management system. its operations and working methods regularly. This may be done
According to good corporate governance, the board also ensures as internal self-evaluation or by using an external evaluator.
that the company has duly endorsed the corporate values applied
to its operations.
In this Code, the operative management shall mean the mana- Recommendation 8 - Election of directors
ging director and the other executives, as defined in section 6.
The duty of the board is to promote the best interest of the com- The general meeting shall elect the directors.
pany and all its shareholders. A director does not represent the
interests of the parties who have proposed his or her election as
director. By electing the directors, the shareholders contribute to the ad-
ministration of the company, and thereby to the operations of the
The boards of Finnish listed companies mainly consist of non- entire company, directly and efficiently. The recommendation is
executive directors. A non-executive director is a person with no also applicable when the company has a supervisory board.
employment relationship or service contract with the company.
In some companies, the managing director is a member of the
board.
Recommendation 9 - Number, composition and
The recommendations regarding the board are also applied to competence of the directors
any deputy members.
The number of the directors and the composition

of the board shall make it possible for the board
Recommendation 5 - Charter of the board to discharge its duties in an efficient manner. The
composition shall take into account the require-
ments placed by the company operations and the
The board shall draw up a written charter for its development stage of the company. A person to be
work and disclose its essential contents. elected to the board shall have the qualifications
required by the duties and the possibility to devote
a sufficient amount of time to the work. Both gen-
Efficient board work requires that the main duties and working ders shall be represented on the board.
principles of the board are defined in a written charter. The infor-
mation that is obtained from the charter permits the shareholders
to evaluate the operations of the board. With regard to the duties and efficient operations of the board,
it is important that the board has a sufficient number of mem-
bers and that the members have sufficient and versatile expertise
Recommendation 6 - Meetings of the board as well as mutually complementing experience. The successful
discharge of board duties requires knowledge of business opera-
tions or their different sections.
The company shall report the number of board
meetings held during the financial period as well A director must have the possibility to engage in the company
as the attendance of the directors at the board matters in a sufficiently extensive manner. Directors, and the
meetings. chairman in particular, are often required to perform a conside-
rable amount of work, both at board meetings and outside the
meetings. When assessing the sufficiency of the time an indivi-
The information on the number of board meetings and atten- dual director is able to devote, e.g. the director’s main occupa-
dance of the directors permits the shareholders to evaluate the tion, secondary occupations and simultaneous board member-
efficiency of board work. The attendance of the directors at the ships must be taken into account.
board meetings can be presented as the attendance of individual
directors or the average attendance of all directors. One element of a diverse composition of the board is to have
both genders represented on the board.

Recommendation 10 - Term of the directors Recommendation 12 - Special order of appoint-
ment of the directors
The directors shall be elected for a term of one

year. If directors are to be appointed according to a spe-
cific order, in accordance with the articles of asso-
ciation, the company shall disclose such appoint-
The shareholders shall have the possibility to evaluate the ope- ment order in the notice of the general meeting.
rations of the directors on a regular basis. Good corporate gover-
nance requires that the directors are elected at the annual general
meeting. Since the shareholders decide on the election and re- The articles of association may provide that less than half of the
election of directors, it is not necessary to restrict the number of directors be appointed following another procedure than election
their successive terms of office. by the general meeting. The special appointment procedure may
concern the employees’ right to appoint directors to the board,
for instance. The provision of the articles of association concer-
ning the appointment procedure shall be disclosed in the notice
Recommendation 11 - Informing the sharehol- of the general meeting so that shareholders are aware of the pro-
ders of director candidates cedure of appointing directors.
The proposal of the nomination committee for bo-

ard composition shall be included in the notice of Recommendation 13 - Right of the board to re-
the general meeting. The same applies to a pro- ceive information
posal for the composition of the board made by
shareholders with at least 10 % of the votes carried
by the company shares, provided that the candi- The company shall provide the board with suffi-
dates have given their consent to the election and cient information on the company operations.
the company has received information on the pro-
posal sufficiently in advance so that it may be in-
cluded in the notice of the general meeting. The In order to discharge its duties, the board needs information
candidates proposed in corresponding order the- about the structure, business operations and market of the com-
reafter shall be disclosed to the public separately. pany, and the company must provide the board with information
on its operations according to company practice. In addition, a
The company shall report the biographical details new director must be introduced to the operations of the com-
of the candidates for the board on its website. pany.
Since the election of directors is one of the most important deci-

sions of the general meeting, the shareholders must be informed Independence of directors
of the director candidates in a timely manner before the general
meeting. Before disclosing the candidates, the company must Recommendation 14 - Number of independent
make sure, however, that the candidates have given their consent directors
to the election.
The presentation of biographical details about the candidates on The majority of the directors shall be independent
the company website promotes the possibility of the sharehol- of the company. In addition, at least two of the di-
ders to take a stand on the election, especially with regard to rectors representing this majority shall be inde-
new director candidates. In this connection, the company may pendent of significant shareholders of the compa-
also present information on the independence of the candidates, ny.
if such information can be presented in an appropriate manner.
It is the duty of the board to supervise and control the operative

management of the company. In order to avoid conflicts of inter-
est, the majority of the directors should not have interdependent
relationship with the company. Although it is recommended that
directors hold shares in the company, the majority consisting of
independent directors shall include at least two directors who
are also independent of significant shareholders of the compa-
ny. Such composition of the board supports the objective that
the board shall act in the interests of the company and all of its
shareholders.

Recommendation 15 - Evaluation of In addition, the board may, based on its overall
independence evaluation, determine that a director is not inde-
pendent of the company or a significant share-
holder. E.g., the following circumstances shall be
The board shall evaluate the independence of the taken into account when making the overall evalu-
directors and report which of them are indepen- ation of independence:
dent of the company and which are independent of
significant shareholders. i) the director participates in the same performan-
ce-related or share-based remuneration scheme
A director is not independent of the company, if as the operative management of the company,
which may be of substantial financial significance
a) the director has an employment relationship or to the director;
service contract with the company;
j) the director has been a non-executive director
b) the director has had an employment relation- for more than 12 consecutive years;
ship or service contract with the company in the
last three years prior to the commencement of k) private or legal persons who are related parties
board membership; of the director have such circumstances as descri-
bed in this recommendation; or
c) the director receives from the company or from
members of its operative management not insig- l) the company is aware of other factors that may
nificant remuneration for services or other advice compromise the independence of the director and
not connected with the duties of the board, e.g. the director’s ability to represent all shareholders.
consulting assignments with the company;
d) the director belongs to the operative manage- The above-mentioned criteria are divided into three categories.
ment of another company, and the two companies The existence of even one of the circumstances cited in sub-
have, or have had in the past year, a customer, sections a) to f) above means that the director cannot be regar-
supplier or cooperation relationship significant to ded as being independent of the company. Sub-sections g) to h)
the other company; present the criteria based on which a director is determined not
to be independent of a significant shareholder of the company.
e) the director belongs to the operative manage- Sub-sections i) to l) deal with issues based on which the board
ment of a company whose director is a member of may, after an overall evaluation, determine that the director is
the operative management of the first-mentioned not independent of the company or a significant shareholder.
company (interlocking control relationship); or
Even if a party was obliged to make a flagging announcement,
f) the director is, or has been in the past three such a party is not regarded as a significant shareholder referred
years, the auditor of the company, a partner or an to in sub-section h) above, if the significance criteria according
employee of the present auditor, or the director is to section h) are not fulfilled for its part.
a partner or an employee in an audit firm that has
been the company's auditor in the past three years. Companies belonging to the same group as the company are con-
sidered equal with the company. A company and another person
A director is not independent of a significant sha- are deemed related parties, if the person is able to exercise signi-
reholder, if ficant influence in the company's decision-making regarding its
finances and business operations.
g) the director exercises control in the company
or the director is a board member or has a rela-
tionship such as referred to in sub-sections a) to
b) above to a party who exercises control in the
company; or
h) the director is a significant shareholder or a bo-

ard member of a significant shareholder of, or has
a relationship such as referred to in sub-sections
a) to b) above to a significant shareholder of the
company. In this recommendation, a significant
shareholder is defined as a shareholder who holds
at least 10 % of all company shares or of the votes
carried by all the shares or who has the right or
obligation to purchase a corresponding number of
already issued shares.

Recommendation 16 - Information reported on 4. BOARD COMMITTEES
directors
The company shall report the following biographi- The proper function of the corporate governance of a company
cal details and information on the holdings of requires that board work be organised as efficiently as possible.
directors: The establishment of board committees may enhance the effi-
• name cient preparation of matters within the competence of the board.
• year of birth The directors on the committees can concentrate on the matters
• education delegated to the committee more extensively than the entire board.
• main occupation
• primary working experience The recommendations on board committees are applicable only
• date of commencement of board membership if the company establishes a committee. If a company establis-
• key positions of trust hes a committee and departs from an individual recommendati-
• shares and share-based rights of the director on on the committee, the company shall disclose and explain the
and corporations over which he or she exercises departure. However, a company shall establish an audit commit-
control in the company and in companies belon- tee, if the extent of the company’s business requires it (recom-
ging to the same group as the company. mendation 24). In addition, even companies that do not establish
an audit committee shall carry out the duties assigned for the
audit committee in recommendation 27.
Shareholders can, on the basis of information obtained about the
board members, evaluate the operating preconditions of the di-
rectors and their relationship with the company.
Recommendation 18 - Establishment of a
The key positions of trust mean a director’s present and former committee
key positions of trust.
Effective discharge of the duties of the board may

require that board committees are established.
Recommendation 17 - Obligation of directors to
provide information
It may be necessary to establish board committees, in particular
for the supervision of the company’s reporting and control sys-
Each director shall provide the board with suffi- tems, the nomination of the management and the development of
cient information that will allow the board to eva- the company’s remuneration schemes. Especially in companies
luate his or her qualifications and independence with extensive business operations, board committees improve
and notify the board of any changes in such infor- the efficiency of board work.
mation.
The committees assist the board by preparing matters falling
within the competence of the board. The board remains respon-
The independence evaluation referred to in recommendation sible for the duties assigned to the committees. The committees
15 requires that the company receive the necessary information have no autonomous decision-making power, and thus the board
from the directors. Each director must also supply the biographi- makes the decisions within its competence collectively.
cal details and information on holdings referred to in recommen-
dation 16. In addition, a director must inform the company of If necessary, the board may also establish other committees than
any essential changes in the information supplied. those mentioned below, combine tasks assigned to various com-
mittees or decide that the entire board shall prepare a specific
issue.

Recommendation 19 - Reporting by a committee In view of the fact that the committees work to render assistance
to the board to the board and prepare matters falling within the competence
of the board, the board shall appoint the members of the commit-
tees from among its members.
A committee shall regularly report on its work to
the board. A committee may exceptionally consist of two members in com-
panies with a board that has only a few members.
The company may internally determine the reporting details and

schedule. The reports shall include at least a summary of the
matters addressed and the measures taken by the committee. Recommendation 23 - Describing the composi-
tion of a committee
Recommendation 20 - Charter of a committee The company shall disclose the composition of a

committee.
The board shall confirm the central duties and

operating principles of a committee in a written The information on committee members permits the sharehol-
charter, the essential contents of which shall be ders to evaluate the relationship of the committee members with
disclosed. the company and the preconditions for efficient committee work.
A written charter determines the role of the committee in the

company. The duties and operating principles must be defined in Audit committee
such a manner that the committee can operate efficiently.
Recommendation 24 - Establishment of the audit
committee
Recommendation 21 - Committee meetings

The company shall establish an audit committee, if
the extent of the company’s business requires that
The company shall report the number of commit- a group with a more compact composition than the
tee meetings held during the financial period and board deals with the preparation of matters pertai-
the attendance of committee members at the mee- ning to financial reporting and control.
tings.
The extent of the company’s business may require that some di-
The information on the number of committee meetings and at- rectors concentrate particularly on matters pertaining to financial
tendance of the members permits the shareholders to evaluate reporting and control. The audit committee has better possibili-
how active the committee has been and subsequently also the ties than the entire board to review questions pertaining to com-
efficiency of board work. The attendance of the members at pany finances and control and take care of the contacts with the
committee meetings may be reported as attendance of individual auditors and the internal audit function.
members or as the average attendance of the members.
Recommendation 25 - Members of the audit

Recommendation 22 - Appointment of members committee
to the committees
The members of the audit committee shall have

The board shall appoint from among the directors the qualifications necessary to perform the res-
the members and the chairman of the committee. A ponsibilities of the audit committee, and at least
committee shall have at least three members. The one member shall have expertise specifically in
members of the committee shall have the exper- accounting, bookkeeping or auditing.
tise and experience required by the duties of the
committee.
The audit committee shall have sufficient expertise in accoun-
ting, bookkeeping, auditing, internal audit or practices related to
financial statements, as the committee deals with matters pertai-
ning to the financial reporting and control of the company. The
expertise may be based on, e.g. experience in corporate mana-
gement.

Recommendation 26 - Independence of the Nomination committee
members of the audit committee
Recommendation 28 - Establishment of the
nomination committee
The members of the audit committee shall be inde-
pendent of the company and at least one member
shall be independent of significant shareholders. The board may establish a nomination committee
to improve the efficient preparation of matters
pertaining to the nomination and remuneration of
Due to the nature of the matters that the audit committee deals directors.
with, its members must be independent of the company as speci-
fied in recommendation 15 above, and at least one member must
be independent of significant shareholders of the company. Identification of individuals suitable as directors and analysing
the experience and skills of candidates prior to a proposal for a
resolution to be presented to the general meeting is important
with regard to ensuring and balancing the competence of the bo-
Recommendation 27 - Duties of the audit ard. The preparation of the composition of the board and the
committee identification of director candidates is an ongoing and long-term
process. The evaluation of the independence of director candida-
tes is part of this process. The board may improve the efficiency
The board shall define the duties of the audit com- of the preparation of the election of directors by establishing a
mittee in the charter confirmed for the committee, nomination committee. The establishment of a nomination com-
based on the circumstances of the company. mittee promotes the transparency and systematic function of the
election process. The nomination committee consists of direc-
The audit committee shall have at least the follo- tors.
wing duties:
• to monitor the reporting process of financial sta- It may be in the interest of the company and all its shareholders
tements; that the nomination committee is aware of the opinion of share-
• to supervise the financial reporting process; holders holding significant voting rights on the proposal for the
• to monitor the efficiency of the company’s inter- appointment of directors under preparation.
nal control, internal audit, if applicable, and risk
management systems; If the general meeting or supervisory board has established a
• to review the description of the main features of nomination board consisting of shareholders or representatives
the internal control and risk management sys- of shareholders in order to prepare the election of directors,
tems in relation to the financial reporting pro- instead of a nomination committee, the company shall disclose
cess, which is included in the company’s Corpo- the election process, composition and operations of the nomina-
rate Governance Statement; tion board. A nomination board established in this manner is not
• to monitor the statutory audit of the financial sta- regarded as departure from the Code.
tements and consolidated financial statements;
• to evaluate the independence of the statutory au- Proposals for directors shall be reported in accordance with re-
ditor or audit firm, particularly the provision of commendation 11.
related services to the company; and
• to prepare the proposal for resolution on the elec-
tion of the auditor.
Recommendation 29 - Members of the nominati-
If the company does not have an audit committee, on committee
the board shall discharge these duties or assign
them to some other committee.
The majority of the members of the nomination
committee shall be independent of the company.
In addition, the duties of the audit committee may comprise, e.g. The managing director or other executive of the
• monitoring the financial position of the company company may not be appointed to the nomination
• approval of the operating instructions for internal audit committee.
• revision of the plans and reports of the internal audit func-
tion
• evaluation of compliance with laws and regulations As the board controls and supervises the operative management
• contacts with the auditor and revision of the reports that the of the company, the majority of the members of the nominati-
auditor prepares for the audit committee. on committee, which prepares the election of directors, must be
independent of the company. Due to the nature of the matters
The duties of the audit committee shall be disclosed in accordance that the nomination committee deals with, neither the managing
with recommendation 20. director nor executive directors may be members of the nomina-
tion committee.

Recommendation 30 - Duties of the nomination Recommendation 32 - Members of the remunera-
committee tion committee
The board shall define the duties of the nomination The majority of the members of the remuneration
committee in the charter of the committee. committee shall be independent of the company.
The managing director or other executives of the
company may not be appointed to the remunerati-
The duties of the nomination committee shall be defined in the on committee.
charter confirmed for the committee and they shall reflect the
requirements of the company. The duties of the nomination com-
mittee may include, e.g.: Due to the nature of the matters that the remuneration committee
• the preparation of the proposal for the appointment of direc- deals with, neither the managing director nor executive directors
tors to be presented to the general meeting may be members of the committee.
• the preparation of the proposal to the general meeting on
matters pertaining to the remuneration of directors
• looking for prospective successors for the directors
• presentation of the proposal on the directors to the general Recommendation 33 - Duties of the remunerati-
meeting. on committee
In connection with the proposal for the appointment of directors,

information on the independence of the candidates may also be The board shall define the duties of the remune-
presented, if the information can be given in an appropriate man- ration committee in the charter of the committee.
ner.
The duties of the nomination committee shall be disclosed in The duties of the remuneration committee shall be defined in the
accordance with recommendation 20. charter confirmed for the committee, and they shall reflect the
requirements of the company. The duties of the remuneration
committee may include, e.g.:
• preparation of matters pertaining to the appointment of the
Remuneration committee managing director and the other executives as well as the
identification of their possible successors
Recommendation 31 - Establishment of the re- • preparation of matters pertaining to the remuneration and
muneration committee other financial benefits of the managing director and other
executives
• preparation of matters pertaining to the remuneration
The board may establish a remuneration commit- schemes of the company
tee to improve the efficient preparation of matters • evaluation of the remuneration of the managing director and
pertaining to the appointment and remuneration of the other executives as well as seeing to it that the remunera-
the managing director and other executives of the tion schemes are appropriate
company as well as the remuneration schemes of • answering questions related to the remuneration statement
the personnel. at the general meeting.
When carrying out its duties, the remuneration committee shall

The remuneration committee can focus on the development of act independently. If the remuneration committee uses an exter-
the remuneration schemes of the managing director and other nal advisor for carrying out its duties, the committee must see to
executives more efficiently than the entire board. The establish- it that the advisor does not advise the human resources depart-
ment of a remuneration committee promotes the transparency ment or the operative management at the same time.
and systematic function of the company’s remuneration sche-
mes. The duties of the remuneration committee shall be disclosed in
accordance with recommendation 20.

5. MANAGING DIRECTOR Recommendation 36 - Managing director and
chairman of the board
The managing director is a corporate body that is in charge of the The managing director shall not be elected chair-
day-to-day management of the company in accordance with the man of the board.
instructions and orders issued by the board. The board appoints
and discharges the managing director and supervises his or her
operations. The election of the managing director as chairman of the board
has been restricted, as it is the duty of the board to supervise the
The managing director may undertake acts which, considering managing director.
the scope and nature of the operations of the company, are unu-
sual or extensive, only with the authorisation of the board. The The company should clearly divide the areas of responsibility
managing director is responsible for ensuring that the company of the managing director and the chairman of the board to en-
accounting practices comply with the law and that the financial sure that all the decision-making powers of the company are, in
matters are handled in a reliable manner. practice, not vested in a single individual. Generally, this means
that the managing director cannot be elected board chairman.
The recommendations of the Code shall be applied to the deputy However, some special circumstances, such as the business area
managing director, when he or she actually takes care of the du- of the company, the extent or development phase of the opera-
ties of the managing director. tions or the ownership structure may justify the combination of
these two roles.
If the company decides to appoint the same person as managing

Recommendation 34 - Managing director’s servi- director and board chairman, it must disclose and explain the
ce contract departure from the recommendation.
The managing director’s service terms and condi-

tions shall be specified in writing in the managing
director’s service contract, which is approved by
the board, and the financial benefits included in
which shall be disclosed.
The position of the managing director in the company requires

that the service terms and conditions of the managing director
be specified in a written agreement approved by the board. The
financial benefits included in the managing director’s service
contract shall be disclosed in accordance with recommendation
46.
Recommendation 35 - Information on the mana-

ging director
The company shall report the biographical details

and information on the holdings of the managing
director.
In connection with the nomination, the company shall report

corresponding biographical details and information on the hol-
dings of the managing director as for the directors (see recom-
mendation 16).

6. OTHER EXECUTIVES 7. REMUNERATION
The operative management of the company is based on the ma- Properly-functioning and competitive remuneration is an es-
nagement organisation adopted for the company. The manage- sential tool for recruiting the best possible management for the
ment organisation is an important element of the company’s company. This in turn contributes to the financial success of the
corporate governance system. The organisation often comprises company and the implementation of good corporate governance.
a management team, which assists the managing director in the Another aim of remuneration is to increase the commitment of
performance of his or her duties. The management team has no the board, the managing director and other executives to pro-
official statutory position but, in practice, it has a significant role mote the interests of the company and its shareholders. The re-
in the organisation of the company management. muneration policy adopted supports the implementation of the
goals set by the company and company strategy as well as its
The term other executives refers to the members of the company long-term results.
management team or, if the company has no management team,
to the executives specified by the company. The transparency of remuneration policy and its principles al-
lows the shareholders to evaluate the appropriateness of the
company’s remuneration policy and its effectiveness in achie-
ving the goals. Open access to information also facilitates the
Recommendation 37 - Management organisation comparison of remuneration practices.
The remuneration paid to the company’s management must be

The company shall disclose the organisation of in proportion to the development and long-term enhancement of
the management. If the company has a manage- the value of the company. The fact that remuneration is linked
ment team, the company shall disclose the compo- to performance and result criteria and monitoring of their imple-
sition and duties of the management team as well mentation increases trust in the function of remuneration.
as the areas of responsibility of its members.
Remuneration consists of, e.g. non-variable and variable remu-
neration, share and share-based remuneration schemes, pension
The disclosure of the management organisation must underline schemes as well as any compensation payable due to termina-
the operative nature of the management activities to make a dis- tion. Variable remuneration comprises various short-term and
tinction from the statutory management bodies of the company. long-term remuneration schemes, which may be linked to the
development of the company result.
The management team refers to the company management team
or a similar body that convenes regularly. The management team In share-based remuneration schemes, remuneration is based on
usually consists of executives of the company’s operative bu- the development of the share value. Share-based remuneration
siness. The main duty of the management team is to assist the schemes also comprise synthetic options and option rights.
managing director.
Principles of remuneration and the decision-

Recommendation 38 - Information on the mem- making process
bers of the management team
Recommendation 39 - Principles applied to re-
muneration schemes
The company shall report the biographical details
and information on the holdings of each member
of the management team. If the company has no Remuneration schemes shall be drawn up in such
management team, the company shall define the a manner that their goal is to promote competi-
other executives about whom the corresponding tiveness and long-term financial success of the
data shall be reported. company and to contribute to the favourable de-
velopment of shareholder value. Remuneration
schemes shall be based on predetermined and
The company shall report corresponding biographical details measurable performance and result criteria.
and information on the holdings of the other executives as for
the directors (see recommendation 16). Remuneration schemes shall be drawn up in writing, and their
contents must be as clear as possible.
Remuneration may be based on long-term and short-term perfor-

mance and results.

Financial and non-financial performance and result criteria, Remuneration of the board of directors
which must be measurable as unambiguously as possible, may
be used as the basis for remuneration. Recommendation 41 - Remuneration and other
benefits of the directors
In the remuneration schemes, the non-variable and variable
components must be proportionate to each other. It may be ap-
propriate to set limits to the variable components of remunera- The company shall disclose the remuneration and
tion. other financial benefits of the directors for the fi-
nancial period.
Remuneration schemes define the period for which the fulfil-
ment of the set performance and result criteria are evaluated The company shall disclose any financial benefits
(earning period). of the chairman of the board and the directors per-
taining to their employment relationship or service
A long-term remuneration scheme may require that the remu- contract, if applicable, in accordance with recom-
neration for the earning period is disposable first after a certain mendation 46.
period of time after the earning period (restriction period).
The company shall disclose the remuneration and other financial
Remuneration that has been paid out groundlessly shall be rec- benefits of each director for board and committee work as well
laimed based on regulations on returning an unjust enrichment. as other duties, if any, for the financial period. If the chairman
of the board or a director has an employment relationship or ser-
vice contract with the company (executive chairman; executive
director) or acts as advisor of the company, the company shall
Recommendation 40 - Decision-making process disclose the salaries and fees as well as other financial benefits
paid for this duty during the financial period.
The general meeting shall decide on the remunera- The payments by all companies belonging to the same group as
tion payable for board and committee work as well the company are included in the remuneration and other finan-
as the basis for its determination. The board of cial benefits.
directors shall decide on the remuneration of the
managing director as well as other compensation The information on the remuneration and benefits of the di-
payable to him or her. The company shall disclose rectors permits the shareholders to evaluate the amount of re-
the decision-making process for the remunerati- muneration in relation to the contribution of the board to the
on of the company’s managing director and other achievement of the company goals. Open communication also
executives. facilitates comparison with the remuneration and other benefits
paid by different companies.
Generally, the body that has appointed a person decides on his or

her remuneration. As the board appoints the managing director,
it also decides on his or her remuneration. In addition, the board Recommendation 42 - Payment of the remunera-
shall decide on the compensation to be paid to the managing tion of the directors in shares
director due to termination of the service contract. The company
shall specify the body that determines the remuneration of the
other executives. Remuneration for board and committee work or
part of the remuneration may be paid in the form
The nomination committee may be assigned the duty of prepa- of company shares.
ring the remuneration of the board. The remuneration committee
may be assigned the duty of preparing the remuneration of the
managing director and other executives. Shareholdings of the directors in the company promote good
corporate governance. A good way of increasing the directors'
Pursuant to the Limited Liability Companies Act, the general shareholdings is to pay the remuneration or part of the remune-
meeting shall decide on the issue of shares or option rights or ration for their board and committee work in the form of shares.
authorise the board to do so. On the other hand, the company must ensure compliance with
insider regulations.
The company may require that a director retain the shares or part
of the shares received as remuneration as long as he or she is a
director.

Recommendation 43 - Participation of the direc- The information on the remuneration scheme and the princip-
tors in a share-based remuneration scheme les governing it permits the shareholders to evaluate the incen-
tive effect of the scheme from the perspective of enhancing the
performance and shareholder value of the company. The trans-
It is not recommended that a non-executive di- parency of the remuneration schemes promotes the creation of
rector participate in a share-based remuneration schemes that are more competitive and motivate to the achieve-
scheme. ment of targets.
The financial benefits of the managing director are disclosed in

The use of share-based remuneration schemes to remunera- accordance with recommendation 46. The main principles for
te non-executive directors is, as a rule, not justified from the the remuneration schemes of the other executives are disclosed,
perspective of the interests of shareholders. This is because the but the disclosure of the personal benefits of the other executives
participation of the board in the same share-based remunerati- is not required.
on scheme as the other executives or personnel may hinder the
implementation of the board’s supervisory duty and lead to con-
flicts of interest.
Recommendation 46 - Information on the service
contract of the managing director
Recommendation 44 - Information on share and

share-based remuneration of directors The company shall disclose the following financial
benefits based on the service contract of the ma-
naging director:
The company shall disclose the shares and share- • salary and other benefits for the financial period
based rights received by a director as remunerati- • shares and share-based rights received as remu-
on during the financial period. neration during the financial period
• retirement age and the criteria for the determina-
tion of pension and additional pension, if any, and
The company shall disclose the number of shares granted to each • period of notice, salary for the period of notice
of the directors as remuneration for board and committee work and the terms and conditions of other possible
in the same manner as the other remuneration and financial be- compensation payable based on termination.
nefits. If directors participate in share-based remuneration sche-
mes, the fees based on such schemes shall also be disclosed.
Due to the significant position of the managing director, it is
Information on the shareholdings of the directors is available in important to give the shareholders detailed information on his or
the company’s insider register. her financial benefits. This information permits the shareholders
to evaluate the amount and substance of the remuneration of the
managing director in relation to the achievement of the goals set
for him or her. Open communication also facilitates comparison
Remuneration of the managing director and of the financial benefits granted to the managing directors of dif-
other executives ferent companies.
Recommendation 45 - Principles for the remune- The company may require that the managing director retain the
ration schemes of the managing director and ot- shares or part of the shares received as remuneration during the
her executives term of the service contract.
Additional pensions may form a considerable part of the total re-

The company shall disclose the main princip- muneration of the managing director, due to which the company
les for the remuneration schemes covering the shall inform of any additional pensions in a transparent manner.
company’s managing director and other executi- As for additional pension, the company shall also inform whet-
ves. her the pension scheme is payment-based or benefit-based.
The disclosure shall include The termination payment and other possible compensation pa-
• the division of the remuneration into non-variable yable due to the termination of the managing director’s service
and variable components, and contract may not, in general, exceed an aggregate amount cor-
• main information on responding to the non-variable salary for two years.
• the determination of the variable components
of the remuneration,
• share and share-based remuneration sche-
mes, and
• additional pensions, if any.

Information on remuneration • the earning and restriction periods included in
the remuneration
• information on share and share-based remu-
A clear and up-to-date description of remuneration within the neration schemes
company promotes the shareholders’ ability to obtain informati- • the principles that are applied to the owner-
on. For this purpose, the company shall draw up a remuneration ship of the shares that the managing director
statement. has received as remuneration
• information on additional pension.
Recommendation 47 - Remuneration Statement The remuneration statement is a consistent description of re-

muneration within the company. The statement is updated ac-
cording to the company practice at certain intervals so that the
The company shall make available on its website information on the website is as up-to-date as possible. Part of
a remuneration statement, which contains a desc- the information is of such nature that it is appropriate to give it
ription of the following entities: for the previous financial period.
Financial benefits The shareholders receive information on remuneration and its

• Board of directors principles from the remuneration statement. The shareholders
• director’s remuneration and other financial may use their right to ask questions on the remuneration state-
benefits ment at the general meeting.
• the shares and share-based rights received by
a director as remuneration The remuneration statement is placed on the company website in
• the principles that are applied to the owner- the Corporate Governance section designed for investors. Links
ship of the shares that a director has received may be used in the presentation of the statement, but a link must
as remuneration lead directly to the information searched.
• the financial benefits pertaining to a possible
employment relationship or service contract
of the chairman of the board and director are
disclosed in the same manner as the financial
benefits of the managing director
• Managing director
• salary and other financial benefits
• shares and share-based rights received as re-
muneration
• retirement age and the criteria for the determi-
nation of pension and additional pension
• period of notice, salary for the period of notice
and the terms and conditions of other possible
compensation payable based on termination.
• Supervisory board, if any
• corresponding information as of the board of
directors
Decision-making process and main principles of

remuneration
• the decision-making process for the remunerati-
on of the managing director and other executives
• the main principles for the remuneration of the
managing director and other executives, such as
the main points regarding the following issues
• the division of remuneration into long-term
and short-term remuneration
• the division of the remuneration into non-va-
riable and variable components
• information on the determination of the va-
riable components of the remuneration and
the limits set for them
• the performance and result criteria and their
impact on the company’s long-term financial
success as well as the manner in which the
implementation of the performance and result
criteria is monitored

8. INTERNAL CONTROL, RISK Recommendation 50 - Internal audit
MANAGEMENT AND INTER-
NAL AUDIT The company shall disclose the manner in which
the internal audit function of the company is orga-
nised.
The purpose of internal control and risk management is to ensure

the effective and profitable operations of the company, reliable The disclosure must include the organisation of the internal au-
information and compliance with the relevant regulations and dit function and the central principles applied to internal audits,
operating principles. Another aim is to be able to identify, eva- such as the reporting principles. The organisation and working
luate and monitor risks related to the business operations. In- methods of the internal audit function depend on, e.g. the nature
ternal audit can help to improve the efficient fulfilment of the and scope of the company’s operations, the number of personnel
board’s supervision obligation. Recommendation 54 deals with and other corresponding factors.
the description of the main features of the internal control and
risk management systems in relation to the financial reporting
process, which is included in the company’s Corporate Gover-
nance Statement.
Recommendation 48 - Operating principles of

internal control
The company shall define the operating principles

of internal control.
To ensure its profitable operations the company must regularly

control its activities. The board ensures that the company has
defined the operating principles of internal control and monitors
the function of such control.
Recommendation 49 - Organisation of risk

management
The company shall disclose the major risks and

uncertainties that the board is aware of and the
principles along which risk management is orga-
nised.
Risk management is part of the company’s control system. The

purpose of risk management is to ensure that the risks related to
the business operations of the company are identified, evalua-
ted and monitored. Well-functioning risk management requires
definition of the risk management principles. For the evaluati-
on of the operations of the company, it is important to provide
sufficient information on risk management. Legislation requires
that the report by the board of directors contain 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.

9. INSIDER ADMINISTRATION
The transparency of the shareholding and trading of insiders

promotes the trust in the securities market. The efficient admi-
nistration of insider matters in a listed company requires that the
insider administration is systematically and reliably organised.
Recommendation 51 - The company’s insider

administration
The company shall comply with the Guidelines

for Insiders issued by the Helsinki exchange and
disclose its essential insider administration pro-
cedures.
Compliance with the Guidelines for Insiders issued for listed

companies by the Helsinki exchange harmonises and improves
the administration of insider matters. The information on the in-
sider administration procedures permits the shareholders to eva-
luate the insider administration of the company.

10. AUDIT Recommendation 53 - Auditor’s fees and fees for
non-audit services
The auditor has an important role as a controlling body ap- The company shall report the fees of the auditor
pointed by the shareholders. The audits give shareholders an infor the financial period. If the auditor has received
dependent opinion on how the financial statements and report by fees for non-audit services, such fees shall be re-
the board of directors of the company have been drawn up and ported separately.
the accounting and administration of the company have been
managed. Placing the audit under competition may increase the The information on the fees of the auditor permits the sharehol-
efficiency and independence of the audit. ders to evaluate the operations of the auditor. Since the auditor
controls the company on behalf of the shareholders, the share-
holders must also be given information on fees paid to the audi-
tor for non-audit services.
Recommendation 52 - Information on auditor
candidates Companies belonging to the same group or chain as the audit
firm as well as companies controlled by the auditor are conside-
red equal with the auditor.
The proposal for the auditor by the audit commit-
tee or board shall be included in the notice of the The fees paid by all companies belonging to the same group as
general meeting. The same applies to a proposal the company are reported as fees.
made by shareholders with at least 10 % of the vo-
tes carried by the company shares, provided that
the candidate has given his or her consent to the
election and the company has received informa-
tion 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 disclo-
sed to the public separately.
Since the election of the auditor is one of the most important

decisions of the general meeting, the shareholders must be in-
formed of the auditor candidate in a timely manner before the
general meeting. The preparation of the election of the auditor
shall be delegated to the audit committee, if the company has an
audit committee (see recommendation 27).
When electing the auditor, it must be taken into account that 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.

11. COMMUNICATIONS The separate report shall be disclosed to the public together with
the report by the board of directors or made available on the
company website simultaneously, in the Corporate Governance
section designed for investors. When the statement is given as
The good corporate governance of a listed company requires a a separate report, the report and the report by the board of direc-
reliable, up-to-date distribution of information. This supports the tors shall have references to each other.
well-founded price development of the shares and promotes trust
in the securities market. The information given by the company The audit committee or some other competent committee shall
makes it possible to evaluate the function of the company’s cor- review the Corporate Governance Statement. If the company
porate governance system and to make decisions on holdings. has no audit committee or other competent committee, the board
shall review the statement. The auditor shall check that the state-
In addition to the contents of the information distributed, the ment has been issued and that the description of the main featu-
clarity of presentation and electronic distribution of informati- res of the internal control and risk management systems related
on promote transparency and improve the possibilities to obtain to the financial reporting process included in it is consistent with
information. the financial statements.
The description of the main features of the internal control and

risk management systems in relation to the financial reporting
Recommendation 54 - Corporate Governance process outlines the manner in which the company’s internal
Statement control and risk management function is organised in order to
ensure that the financial reports disclosed to the public by the
company give essentially correct information about the company
In connection with the report by the board of direc- finances. The description is given at group level.
tors, the company shall issue a separate Corpora-
te Governance Statement. The description of the composition and operations of the board
and the board committees shall contain the following informa-
The company shall present at least the following tion:
entities in the statement: • composition of the board of directors as well as the na-
• information on compliance with this Code mes, years of birth, education and main occupation of the
• if the company has departed from an individual directors
recommendation, information on this as well as • number of board meetings and the attendance of the mem-
the explanation for the departure bers at the meetings
• the address of the website on which this Code is • special order of appointment of directors, if applicable
publicly available • board members who are independent of the company and
• a description of the main features of the internal significant shareholders
control and risk management systems in relation • disclosure of the main contents of the board’s charter
to the financial reporting process • committees appointed by the board, if any
• a description of the composition and operations • composition of the committees
of the board and board committees • number of committee meetings during the previous
• a description of the body that is responsible for financial period and the attendance of the committee
the duties of the audit committee members at the meetings
• information on the managing director and his or • disclosure of the main contents of the charter defined
her duties for the committee by the board.
• a description of the composition and operations
of the supervisory board, where applicable.
The description of the composition and operations of a supervi-
sory board, where there is one, shall contain the corresponding
The law requires the company to present its Corporate Gover- information as given on the board, for applicable parts.
nance Statement in the report by the board of directors or as
a separate report. The contents of the report are also based on The name, year of birth and education of the managing director
legislation. is presented in addition to information on his or her duties.
By presenting the Corporate Governance Statement as a sepa- The company shall keep the statement on its website at least five
rate report, the company may emphasise the information given years.
to shareholders and other investors. The information can also
easily be found in a separate report.

Investor information on the company website Managing director and other executives
• biographical details and duties of the managing
director
The investor information on the company website provides in- • shares and share-based rights of the managing
formation about the company to shareholders and other inves- director and corporations over which he or she
tors. This recommendation presents a summary of the infor- exercises control in the company and in compa-
mation that shall be made available on the company website in nies belonging to the same group as the compa-
accordance with the different recommendations of this Code, ny
information required by law or other regulation as well as other • financial benefits included in the managing
information that promotes the investors’ ability to obtain infor- director’s service contract
mation about the company. • organisation of the management as well as the
composition, duties and areas of responsibility of
the members of the management team
• biographical details of the other executives
Recommendation 55 - Investor information on • shares and share-based rights of other executi-
the company website ves and corporations over which they exercise
control in the company and in companies belon-
ging to the same group as the company
The company shall present the following informa-
tion on its website: Risk management and control
• a description of the main features of the internal
Compliance with the Code control and risk management systems in relation
• information on compliance with this Code to the financial reporting process mentioned in
• if the company has departed from an individual recommendation 54
recommendation, information on this as well as • the principles along which risk management is
the explanation for the departure organised
• the major risks and uncertainties that the board
Statements is aware of
• Corporate Governance Statement (see recom- • organisation of the internal audit function
mendation 54) • essential procedures of the insider administrati-
• Remuneration Statement (see recommendation on
47)
Audit
General meeting • auditor
• notice of the general meeting, which contains the • auditor’s fees
proposal for the agenda, and the following infor- • fees paid to the auditor for non-audit services
mation prior to the meeting:
• the documents to be submitted to the general
meeting >>>
• the draft resolutions to the general meeting
• the date by which a shareholder shall notify the
board of directors of the company of an issue that
he or she demands to be included in the agenda
of the annual 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
The board and its committees, if any

• the information mentioned in recommendation 54
• biographical details of the director candidates
• biographical details of the directors
• shares and share-based rights of the director
and corporations over which he or she exercises
control in the company and in companies belon-
ging to the same group as the company
• essential contents of the charter of the board
• essential contents of the charters of the commit-
tees

Other matters to be presented 12. EFFECTIVE DATE
• information that the company has disclosed to
the public based on the disclosure obligation of a
listed company
• articles of association The Code shall replace the Corporate Governance Code issued
• redemption clauses included in the articles of as- in October 2008. The Code will enter into force on 1 October
sociation, if any 2010. The Code may, however, be applied immediately after it
• shares, share capital and major shareholders as has been issued.
well as the flagging announcements for the past
12 months
• shareholder agreements that the company is
aware of
• financial statements and the report by the board
of directors as well as the auditors' report and
annual report for the previous financial period, if
any
• a calendar of events, which contains the follo-
wing dates
• the date of disclosure of the financial state-
ments release to the public
• the date of disclosure of interim reports to the
public
• the date of disclosure of interim management
statements to the public, if any
• the date of the annual general meeting
• the week during which the financial state-
ments and report by the board of directors are
disclosed to the public
• the information mentioned in recommendation 54
on the supervisory board, where there is one
• information on the election process, composition
and operations of nomination board, if the gene-
ral meeting or supervisory board has established
a nomination board consisting of shareholders or
representatives of shareholders in order to pre-
pare the election of directors, instead of a nomi-
nation committee.
The open and clear presentation of investor information makes it

easier to get an overall picture of the operations of the company.
It is of essential importance that the entities are clearly defined
and can easily be found on the company website in an inves-
tor-friendly manner. The information may be presented on the
company website by using technical solutions of various kinds.
Links may be used in the manner of presenting the information,
but the links must lead directly to the information searched.
The company shall update the information on its website at cer-

tain intervals, in accordance with its own practices, so that the
information on the website is as up-to–date as possible. Part of
the information is of such nature that it is appropriate to give it
for the previous financial period. After the annual general mee-
ting, the company should, however, update the information on
its website, when necessary.

P.O. BOX 324,
FIN-00121 Helsinki
[email protected]
www.cgfinland.fi

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Finnish Corporate

Securities Market Association

Securities Market Association

Corporate Governance working group

Pekka Merilampi, Lagman, was Chairman of the working group.

History of the Code

Corporate Governance Code of 2008

2 Finnish Corporate Governance Code 2010

Finnish Corporate Governance Code 2010

Finnish Corporate Governance Code 2010 3

Aims of the Code................................................................................................................................................. 6

Recommendation 1 - Information on general meetings to shareholders............................................................ 8

Recommendation 5 - Charter of the board........................................................................................................ 10

Recommendation 18 - Establishment of a committee....................................................................................... 13

4 Finnish Corporate Governance Code 2010

Recommendation 34 - Managing director’s service contract............................................................................ 17

6. OTHER EXECUTIVES ......................................................................................................................... 18

Recommendation 37 - Management organisation............................................................................................ 18

Principles of remuneration and the decision-making process........................................................................... 18

Remuneration of the board of directors ........................................................................................................... 19

8. INTERNAL CONTROL, RISK MANAGEMENT AND INTERNAL AUDIT............................................ 22

Recommendation 48 - Operating principles of internal control......................................................................... 22

Recommendation 51 - The company’s insider administration.......................................................................... 23

10. AUDIT ................................................................................................................................................ 24

Recommendation 52 - Information on auditor candidates................................................................................ 24

Recommendation 54 - Corporate Governance Statement................................................................................ 25

Investor information on the company website................................................................................................... 26

12. EFFECTIVE DATE.............................................................................................................................. 28

Finnish Corporate Governance Code 2010 5

6 Finnish Corporate Governance Code 2010

The decisions of a general meeting shall be made by majority or

A shareholder may have several proxy representatives, who

Finnish Corporate Governance Code 2010 7

The documents presented to the annual general meeting, which

8 Finnish Corporate Governance Code 2010

The general meeting shall be organised in such a manner that the

Recommendation 3 - Attendance of the board of

The chairman of the board of directors and a suf-

The presence of members of the board of directors and its com-

By exercising their right to ask questions, the shareholders can

The presence of the auditor at the annual general meeting allows

Finnish Corporate Governance Code 2010 9

The number of the directors and the composition

10 Finnish Corporate Governance Code 2010

The directors shall be elected for a term of one

The proposal of the nomination committee for bo-

Since the election of directors is one of the most important deci-

It is the duty of the board to supervise and control the operative

Finnish Corporate Governance Code 2010 11

h) the director is a significant shareholder or a bo-

12 Finnish Corporate Governance Code 2010

Effective discharge of the duties of the board may

Finnish Corporate Governance Code 2010 13

The company may internally determine the reporting details and

Recommendation 20 - Charter of a committee The company shall disclose the composition of a

The board shall confirm the central duties and

A written charter determines the role of the committee in the

Recommendation 21 - Committee meetings

Recommendation 25 - Members of the audit