CORPORATE GOVERNANCE STATEMENT 2013

Transcription

1 CORPORATE GOVERNANCE STATEMENT February 2014 CRAMO GROUP 1

2 1 Corporate Governance Statement Board of Directors Audit Committee Nomination and Compensation Committee Meeting Attendance of Board and Committee Members President and CEO Internal control and risk management regarding financial reporting

3 1 Corporate Governance Statement Corporate governance at Cramo Plc is based on Finnish law and the company s Articles of Association. Cramo complies with the rules of NASDAQ OMX Helsinki Ltd and the Finnish Corporate Governance Code published by the Securities Market Association. This Corporate Governance Statement has been prepared in compliance with Finnish Corporate Governance Code Recommendation 54. Cramo does not deviate from the Finnish Corporate Governance Code Recommendations. The Code is available in full on the Securities Market Association s website, This statement has been approved by Cramo Board of Directors and it is issued separately from the Board of Directors report. Cramo s auditors, Ernst & Young Oy, have checked that the statement has been issued and that the description of the main features of internal control and risk management systems as described in the statement regarding Cramo Group s financial reporting process is consistent with the financial statements. Further information about Cramo s corporate governance matters can be found on the Group s website as well as in the Board of Directors report and the Corporate Governance section in the Annual Report. 2 Board of Directors Cramo s Board of Directors has defined its roles and responsibilities in the Working Order of the Board and in the Group s Operating Principles. The latter acts also as the Corporate Governance Manual for operative management. If necessary, the Board s charter is revised and modified annually in conjunction with the first meeting of the Board after the election of its members at the Annual General Meeting. The Board of Directors is responsible for Cramo Group s governance and appropriate management, and for ensuring that the Group s operations comply with relevant rules and regulations, Cramo s Articles of Association, and the instructions given by the General Meeting of Shareholders. The Board of Directors is responsible for the Company s strategic steering and for supervising the business. It also decides on the Group s key policies and practices, approves the business strategy and budget, approves financial statements and interim reports, appoints and dismisses the President and CEO and his/her deputy, decides their compensation, and decides on the Group s structure, acquisitions and disposals as well as Company finances and investments. Additional information about the Board and its committees can be found in the Annual Report and the Company s website ( Information about the remuneration of the Board, committee members and Group management is disclosed in the Remuneration Statement, which can also be found on the Company s website. 3

4 Members of the Board in 2013 At the Annual General Meeting (AGM) 2013, the following persons were re-elected to the Board of Directors: Mr Stig Gustavson, Ms Helene Biström, Mr Eino Halonen, Mr Victor Hartwall, Mr Jari Lainio and Mr Esko Mäkelä. Mr Erkki Stenberg was elected as a new Board member. The Board s convening meeting elected Mr Gustavson as Chairman of the Board and Mr Halonen as Deputy Chairman of the Board. There is no specific order for the appointment of directors in Cramo Plc s Articles of Association. Stig Gustavson Chairman since 2007, Board member since Member of the Nomination and Compensation Committee. Born 1945, Finnish citizen, Dr.Tech. (hon) and M.Sc. (Eng.) Deemed independent of the Company and its major shareholders. Main occupation: Board professional Primary work experience: Konecranes Plc's President and CEO ; President of KONE Cranes division ; various executive positions with major Finnish companies Board Chairman: Konecranes Plc, Svenska Handelsbanken AB (publ) Regional Bank Finland, Technology Academy Foundation, Ahlström Capital Oy, ÅR Packaging AB Board Deputy Chairman: Mercantile Oy Ab, Dynea Oy Supervisory Board member of Mutual Pension Insurance Company Varma Senior Regional Advisor of IK Investment Partners Eino Halonen Deputy Chairman since 2007, Board member since Chairman of the Audit Committee. Born 1949, Finnish citizen, B.Sc. (Econ.) Deemed independent of the Company and its major shareholders. Primary work experience: Suomi Mutual Life Assurance Company, President and CEO Board member: Metsäliitto Cooperative 4

5 Helene Biström Board member since Chairman of the Nomination and Compensation Committee Born 1962, Swedish citizen, M.Sc. (Eng.) Deemed independent of the Company and its major shareholders. Main occupation: Managing Director of Norrenergi AB Primary work experience: Senior Executive Vice President and Head of Business Group Pan Europe at Vattenfall AB and Member of Executive Group Management at Vattenfall ; Vice Head of Vattenfall Business Group Nordic ; Head of the Nordic Heat Business unit at Vattenfall Board member: KTH Royal Institute of Technology, Swedish District Heating Association and Candyking Holding AB Victor Hartwall Board member since Member of the Audit Committee. Born 1966, Finnish citizen, M.Sc. (Econ.) Deemed independent of the Company, but not independent of a major shareholder. Main occupation: Managing Director of K. Hartwall Invest Oy Ab Primary work experience: Deputy Managing Director of Lankapaja Oy ; Controller, K. Hartwall Oy Ab ; Product Manager, K. Hartwall Oy Ab Board Chairman: Lankapaja Oy Board member: K. Hartwall Oy Ab, K. Hartwall Invest Oy Ab, Malmgårds bryggeri Ab 5

6 Jari Lainio Board member since Member of the Nomination and Compensation Committee. Born 1955, Finnish citizen, Construction Engineer Deemed independent of the Company and its major shareholders. Main occupations: Managing Director of Lainio & Laivoranta Ltd., Managing Director of Rakennustoimisto Lainio & Laivoranta Ltd. Primary work experience: Managing Director of Rakennustoimisto Laivoranta Ltd , Technical Director of Rakennustoimisto Laivoranta Ltd , Managing Director of Rakennustoimisto Lainio & Laaksonen Ltd Board Chairman: Rakennusteollisuus RT, Lounais-Suomi Board member: Turun Rakentamistaidon edistämissäätiö Esko Mäkelä Board member since Member of the Audit Committee. Born 1943, Finnish citizen, M.Sc. (Eng.), MBA Deemed independent of the Company and its major shareholders. Primary work experience: Executive Vice President, CFO of YIT Corporation Board Chairman: Everalis Oy Board member: Convergens Oy Erkki Stenberg Board member since Member of the Nomination and Compensation Committee. Born 1950, Finnish citizen, undergraduate of agriculture and forestry Deemed independent of the Company and its major shareholders. Primary work experience: CEO, LVI-Dahl ltd ; CEO, Suomen LVI-Tukku Ltd ; Various positions, Huber Ltd, Senior Advisor, LVI-Dahl Ltd 6

7 Work of the Board of Directors in 2013 Cramo s Board meets regularly, about once a month, according to a planned schedule. In 2013, the Board of Directors met nine times. One meeting was a conference call. Member attendance at the meetings is provided in a table on page 10. The figure below outlines the Board s operating calendar. Q1 Q2 Q3 Review and approval of financial statements and external auditor s report Review and approval of Nomination and Compensation Committee s outcome proposal pertaining to the incentive schemes of management and key employees Commencement of strategic planning: analysis of operating environment, markets and economic trends Approval of Annual Report and Corporate Governance Statement Preparations for the AGM Review of Group s and Operating Companies performance and Key Performance Indicators Review of financial forecasts, investments, acquisitions and disposals as well as structural issues Approval of interim reports and assessment of matters pertaining to markets and finances Election of the Chairman and Deputy Chairman of the Board and Committee members Review and approval of Group s key policies and practices Assessment and analysis of strategic issues in connection with the strategy review Assessment of matters presented by the Audit Committee Review of Group s and Operating Companies performance and Key Performance Indicators Review of financial forecasts, investments, acquisitions along with disposals as well as structural issues Approval of interim reports and assessment of matters pertaining to markets and finances Commencement of budgeting and Operating Companies business planning Review of Group s and Operating Companies performance and Key Performance Indicators Review of financial forecasts, investments, acquisitions and disposals as well as structural issues Approval of interim reports and assessment of matters pertaining to markets and finances Follow-up of strategic outcomes and the previous financial periods Strategy, execution and business development Q4 Approval of budget and review of business plans Assessment of matters presented by the Audit Committee Board s self-assessment Review of Group s and Operating Companies performance and Key Performance Indicators Review of financial forecasts, investments, acquisitions and disposals as well as structural issues Approval of interim reports and assessment of matters pertaining to markets and finances Planning of the following financial period In 2013, Cramo renewed its organisation to support the achievement of the Group s strategic and financial targets. Cramo also formed a joint venture with Ramirent in Russia and Ukraine and completed outsourcing transactions in Norway. In addition, Cramo redeemed its EUR 50 million hybrid bond. Throughout the year, Cramo applied strict cost and investment control in all its operations and continued the implementation of the Group s must-win battles. All the issues mentioned above involved the work and control of the Board in Two permanent committees, the Audit Committee and the Nomination and Compensation Committee, assist the Board of Directors. The Board elects the committee members and appoints the committee chairmen. A quorum is more than half the members. Members are appointed for a one-year term of office, which expires at the end of the first Annual General Meeting following the election. The Board confirms the central duties and operating principles of both committees in a written charter. The main content of these charters is outlined below. 7

8 2.1 Audit Committee The Audit Committee assists the Board of Directors in its supervisory responsibilities. In line with the Finnish Corporate Governance Code, the Audit Committee has the following duties: monitoring the reporting process of financial statements; supervising the financial reporting process; monitoring the efficiency of the Company s internal control, internal audit, and risk management systems; reviewing the description of the main features of the internal control and risk management systems regarding the financial reporting process, which is included in the Company s Corporate Governance Statement; monitoring the statutory audit of the financial statements and consolidated financial statements; evaluating the independence of the statutory auditor or audit firm, particularly the provision of related services to the Company to be audited; preparing the proposal for resolution on the election of the auditor, and; assessing the effects of any exceptional or significant business transactions. Until 25 March 2013, the Audit Committee was chaired by Mr Eino Halonen, with Mr J.T. Bergqvist and Mr Esko Mäkelä as Committee members. At its constitutive meeting on 26 March 2013, Mr Eino Halonen was appointed Chairman of the Audit Committee and Mr Victor Hartwall and Mr Esko Mäkelä were elected as members. Mr Halonen and Mr Mäkelä are deemed independent of the Company and major shareholders. Mr Hartwall is deemed independent of the Company, but not independent of the major shareholders. The Audit Committee met four times in Member attendance at the meetings is provided in a table on page 10. The following figure outlines the Audit Committee s operating calendar. 8

9 Q1 Q2 Q3 Q4 Supervise and monitor financial reporting process related to annual accounts Review of annual financial statements and Board of Directors report Review external audit outcomes and Auditor s statement Review and approve accounting principles pertaining to financial reporting Review risks and risk management issues to be presented in the Annual Report and Financial Statements Review, update if necessary and affirm the Internal Control Policy Review and approve annual Internal Audit Plan and assign separate evaluation activities as considered appropriate Assess results from Operating Companies internal control self-assessments Review impairment and asset valuation, treasury and operational risks Assess and plan the description of the main features of the internal control and risk management systems pertaining to the financial reporting process that is included in the Corporate Governance statement Discuss the external audit plan with the responsible auditor. Approve the plan consequently Review and approve the external audit engagement letter and evaluate the independence confirmation Review the draft Corporate Governance statement and provide comments Review internal audit and Internal Control development plan Assess results from Operating Companies internal control self-assessments Prepare the proposal for resolution on the election of the external auditor Review risk assessments concerning asset valuation, treasury and operational risks Quarterly procedures Monitor the reporting process of financial statements by overseeing the quality and integrity of the Financial Statements and related Disclosures Supervise the financial reporting process Follow-up of financial position by reviewing Interim Financial Statements Monitor efficiency of Cramo s internal control, internal audit and risk management systems Revise the plans and reports of the Internal Audit function Evaluate compliance with laws and regulations Communicate with External Auditor and review the reports prepared for the Audit Committee 2.2 Nomination and Compensation Committee The Nomination and Compensation Committee is tasked with preparing a proposal for the Board members and their remuneration to be presented to the Annual General Meeting. It also prepares a proposal to the Board of Directors for the President and CEO s appointment and his/her employment terms. The Nomination and Compensation Committee prepares and evaluates matters regarding the remuneration and other financial benefits of the President and CEO as well as the Group management team and makes sure that the remuneration principles are appropriate. It also prepares matters regarding the Company s compensation systems including profitbased and long-term incentive schemes and allocation of these incentives amongst Cramo s personnel. The Company s strategy, strategic cornerstones, must-win battles and long-term financial goals are taken into account when deciding the remuneration schemes. Further information about compensation can be found in the Company s Remuneration Statement. The committee answers any questions related to the Remuneration Statement at the Annual General Meeting. Until 25 March 2013, the Nomination and Compensation Committee was chaired by Mr Stig Gustavson, with Ms Helene Biström, Mr Victor Hartwall and Mr Jari Lainio as members. At its constitutive meeting on 26 March 2013, Mr Stig Gustavson was appointed Chairman of the Nomination and Compensation Committee and Ms Helene Biström, Mr Erkki Stenberg and Mr Jari Lainio were elected as members. Mr Gus- 9

10 tavson, Ms Biström, Erkki Stenberg and Mr Lainio are deemed independent of the Company and the major shareholders. On 25 June 2013 the Board of Directors resolved to appoint two new members, Mr Peter Therman and Mr Tom von Weymarn, to the Nomination and Compensation Committee. Mr Therman and Mr von Weymarn are deemed independent of the Company and the major shareholeders. Mr Therman and Mr von Weymarn are not members of the Board of Directors. On 24 September 2013, Mr Stig Gustavson announced that he would be unavailable to run in the election of the Board at the Annual General Meeting in The Board elected Ms Helene Biström Chairman of the Nomination and Compensation Committee on 24 September Mr Stig Gustavson continues to serve as a member. The Nomination and Compensation Committee met three times in Member attendance at the meetings is provided in the table below. 2.3 Meeting Attendance of Board and Committee Members The following table presents Cramo s Board and Committee meeting attendance in Name Position Board meetings Audit Committee Stig Gustavson Chairman 9 of 9-3 of 3 Eino Halonen Deputy 9 of 9 4 of 4 - Chairman Helene Biström Member 9 of 9-3 of 3 Victor Hartwall Member 9 of 9 3 of 3 1 of 1 Jari Lainio Member 9 of 9-3 of 3 Esko Mäkelä Member 9 of 9 4 of 4 - Erkki Stenberg since 26 March J.T. Bergqvist until 25 March Peter Therman since 25 June Tom von Weymarn since 25 June Member 6 of 8-2 of 2 Member 1 of 1 1 of 1 - External Committee Member External Committee Member of of 2 Nomination and Compensation Committee 3 President and CEO Cramo Plc s managing director, who also acts as the President and CEO, is in charge of the Company s day-to-day management in accordance with the Finnish Companies Act and related legislation, instructions and orders given by the Board of 10

11 Directors. Further information regarding the President and CEO is available in the Annual Report and on the Company s website. Vesa Koivula Position: President and CEO since 2003 Born: 1954, Finnish citizen Education: M.Sc. (Eng.), Tampere University of Technology Employed by Cramo since 2003 Primary work experience: Fiskars Inha Ähtäri Works, Managing Director and Vice Managing Director , Morus Oy, Managing Director Board Chairman: European Rental Association (ERA) Board member: Marinetek Oy 4 Internal control and risk management regarding financial reporting Introduction to internal control and risk management at Cramo Internal control over financial reporting is part of the overall internal control system at Cramo, which is described in the Annual Report and on the Company s website. The Enterprise Risk Management (ERM) framework, tailored to Cramo Group s business needs, provides the overall framework for the Group s internal control and risk management. The ERM framework is thus an integral part of the Group s internal control environment and monitoring and control structure. Internal control over financial reporting strives to provide reasonable assurance that the Group s financial reporting is reliable and that external financial reporting is prepared in accordance with legislation, International Financial Reporting Standards (IFRS) and other requirements set for listed companies. Financial reporting process at Cramo Group reporting is based on the Hyperion consolidation and reporting system facilitating common control requirements for all operating companies ( OpCos ) and legal entities reporting to the Group. Subsidiaries submit their figures to the reporting system for consolidation. The reported figures are reviewed in subsidiaries as well as by Group accounting. The Group Finance and Development function maintains the Group s aggregated chart of accounts. The target is that all Cramo countries share common business and financial reporting processes. Information relevant to financial reporting is identified, accessed, processed and distributed in accordance with Cramo s processes and procedures. In financial report- 11

12 ing, the Controller s Manual, financial guidelines and IFRS accounting principles (as adopted by the European Union) set the standards for financial reporting as well as accounting policies and reporting procedures at Cramo. These documents are updated regularly and communicated throughout the Group. Other internal policies and rules related to the financial reporting process include the Treasury Policy, Matrix of Authorisations and Approval Limits Granted as well as the Code of Conduct. Information about internal financial guidelines, their updates and schedules is distributed regularly to all employees concerned. The financial reporting process and its procedures are harmonised through the work of Country Group controllers, whose daily control work increases the reliability of the financial reporting process. The Group s financial guidelines are developed and updated on a continuous basis. Depot-level financial monitoring and there-related controls is a specific focus area. In 2013, depot-level financial controls were further enhanced through the widened usage of the Group s harmonised business intelligence reporting system (CraBi). Roles and responsibilities The Board bears ultimate responsibility for the appropriate arrangement of internal control over financial reporting. The Board supervises and approves annual financial statements and interim reports. The Audit Committee assists the Board of Directors in overseeing the effectiveness of established internal control and risk management principles. These duties are accomplished by supervising the accounting and reporting processes as well as by an audit of the financial statements to ensure the quality and integrity of the financial statements and related disclosures. In practice, the President and CEO and OpCo managers are in charge of performing internal control activities for financial reporting. They are supported in this task by the CFO, the Group Finance and Development function and OpCo financial management. The Group s President and CEO is responsible for maintaining an effective control environment by ensuring implementation of internal control and risk management processes and their operational effectiveness. The President and CEO also ascertains that the Company s accounting practices comply with legislation and that financial matters are handled in a reliable manner. Senior managers assign responsibility for establishing more specific internal control policies and procedures to personnel responsible for the functions of the unit. Management and employees are assigned appropriate levels of authority and responsibility to facilitate effective internal control in financial reporting. Risk assessment and control activities Cramo has established objectives for reliable financial reporting in order to identify financial reporting risks. Within the risk assessment process, Cramo identifies and analyses risks to achieving financial reporting objectives as a basis for determining how those risks should be managed and mitigated. The risk assessment process has been extended to also take into consideration the potential for material misstatement due to fraud. 12

13 Control activities are linked to risk assessment, and specific actions are taken to address risks to achieving financial reporting objectives. The risks identified related to financial reporting are managed through control activities which are set throughout the organisation, at all levels and in all functions. Financial officers and their staffs, whose control activities cut across, as well as up and down, the Group s operating and other units, are particularly important. Cramo s Group-wide controls include a variety of activities such as approvals, authorisations, verifications, reconciliations, reviews of operating performance, safeguarding of assets and segregation of duties. Monitoring In order to ensure the effectiveness of internal control regarding financial reporting, monitoring is conducted by the Board, the Audit Committee, the President and CEO, the CFO and the Group Finance and Development function, Internal Audit, the Group management team and OpCo managers and controllers. Follow-up is accomplished through on-going monitoring activities, separate evaluations or a combination of the two. The Audit Committee approves the charter for the Group s Internal Audit and the annual audit plan as well as assesses its operations. As part of the Internal Audit plan, the Group s Internal Audit (IA) function also performs independent audits of Cramo s financial reporting process and assesses the effectiveness of Cramo s controls at the Group level and in the OpCos. The results of audit assignments are reported regularly to the Audit Committee, the CFO and Group management. These results are also shared with the Group s external auditors, and internal activities are aligned with the suggestions presented by the external auditors. Furthermore, the Group Finance and Development function monitors the adequacy and effectiveness of Cramo s control activities and ensures that external reporting is correct, timely and in compliance with regulations. OpCo managers and controllers ensure compliance with the Group s financial reporting guidelines along with local, state and national budgetary reporting requirements and that local external reporting is correct and timely. On-going monitoring activities include the follow-up of monthly financial reports relating to the budget, forecasts and other targets, follow-up of business plans, monitoring of new plans and follow-up of internal and external projects. The scope and frequency of separate evaluations depend primarily on an assessment of risks and the effectiveness of on-going monitoring procedures and control activities. Internal control deficiencies are identified and communicated in a timely manner to the parties responsible for taking corrective action, as well as to management, the Audit Committee and the Board as appropriate. Implementation and control of financial and other business targets are monitored through Group-wide financial reporting and through regular operating company Board meetings as well as management and controller meetings. Additionally, Cramo s CFO team meets on a regular basis to monitor and review Group and OpCo competencies and resources in financial reporting, the status of ongoing projects and areas for further development in financial matters. Chaired by the CFO, the Financial Steering Group meets about quarterly to review and assess the 13

14 progress of the Finance and Development business plan and the most important ongoing development projects. The Treasury Committee similarly meets to assess the Group s finance issues including finance-related risks, cash flow, currency matters and the adequacy of finances. The Group accounting team, in turn, meets regularly to review the quality and improvement needs in internal and external financial reporting. Country Group controllers meet in monthly meetings to analyse the financial results and reporting of Operating Companies. Cramo s Financial Coordination Group (FCG) conducts a biannual or annual meeting to discuss development needs in the financial reporting process and the controller function concerning the Group as a whole. The FCG consists of Cramo s Finance and Development function members and OpCo financial managers and controllers. Issues examined include improvement requirements in control activities, development of controllers work, current issues regarding annual reporting, and identified enhancement needs related to the financial reporting platform. General development activities in internal control and risk management in 2013 While implementing Cramo Group s strategy, the Group management team established a framework for translating operational excellence into action. The framework is based on the Group s strategy, must-win battles and evaluation of strategic and operarional risks. The main drivers of operational excellence are customer offerings and sales excellence, process efficiency and capital efficiency. In addition, the Group management team also completed the application of the Group s risk appetite model in This was done by setting measures for different factors of the Group s risk appetite while assessing risk appetite through the shareholder value model and the different drivers of shareholder value. The Finance and Development function helped in the overall assessments. The implementation and utilisation of the risk appetite model continues in different ways in In 2013, Cramo also continued the launch of the One Cramo Enterprise Rental application and further improved the Cramo Business intelligence (CraBi) reporting tool in order to further advance the harmonisation and development of the Group s control and reporting. Internal control and risk management development activities related to financial reporting in 2013 There was an emphasis on pricing and cost control as well as cash flow in Treasury processes were also streamlined and the implementation of the new treasury management system was completed. The Group Internal Audit function continued to review the key operative processes in selected OpCos in order to further develop control maturity. In addition, OpCo followup reviews were conducted when required. Depot-level internal audits were continued as an on-going control activity. 14

15 The Group s Finance and Development function also completed the pre-study of the Group s new consolidation and reporting system and launched the updated Financial Manual. Priority areas in 2014 Cramo s controlling and steering model is aimed at adding value to the business. This is achieved through forward-looking analysis, simplification, prioritisation and participation. Focus areas will be the further harmonisation of finance and treasury processes, competitive financing and Cramo performance management. The Group Finance and Development function will implement the new consolidation and reporting system (Hyperion Financial Management) in order to further strengthen the integrity of the Group s financial reporting. In 2014, internal control will also include monitoring of control activities in selected OpCos. The selection of OpCos for review will be risk-based, and the review will be performed by Group financial management, Country Group controllers and the Group Internal Audit function. Improvement measures will be identified and implemented in order to further advance control maturity. The depot audit program will continue as a sustained control activity. 15