CORPORATE GOVERNANCE STATEMENT 2014

Transcription

1 CORPORATE GOVERNANCE STATEMENT February 2015 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, KPMG Oy Ab, 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 2014 At the Annual General Meeting (AGM) 2014, the following persons were re-elected to the Board of Directors: Ms Helene Biström, Mr Eino Halonen, Mr Victor Hartwall and Mr Erkki Stenberg. Mr Leif Boström, Ms Caroline Sundewall and Mr Raimo Seppänen were elected as new Board members. The Board s convening meeting elected Ms Biström 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. Helene Biström Chairman since 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. Managing Director, Norrenergi AB, ; 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 Current positions of trust: Board member: KTH Royal Institute of Technology and Sveaskog AB 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. Suomi Mutual Life Assurance Company, President and CEO Leif Boström Board member since Member of the Audit Committee. Born 1959, Swedish citizen, B. Sc. (Economics) CEO, LKAB Minerals (since 2014) Deemed independent of the Company and its major shareholders. CFO, LKAB ; Financial Manager, Minelco Group ; Accounts Manager, LKAB ; Controller, LKAB ; 4

5 Purchasing Officer, NCC ; Supervisor, NCC Current positions of trust: Board Chairman: LKAB Fastigheter AB, Wassara AB and LKAB Försäkring 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 its major shareholders. Main occupation: Managing Director of K. Hartwall Invest Oy Ab Deputy Managing Director of Lankapaja Oy ; Controller, K. Hartwall Oy Ab ; Product Manager, K. Hartwall Oy Ab Current positions of trust: Board Chairman: Lankapaja Oy Board member: K. Hartwall Oy Ab, K. Hartwall Invest Oy Ab, Malmgårds bryggeri Ab Raimo Seppänen Board member since Member of Nomination and Compensation Committee. Born 1956, Finnish citizen, Civil Engineer Head of Housing Repairs, YIT Construction Ltd., Apartment Houses Metropolitan Area -unit (since 2006) Deemed independent of the Company, but not independent of its major shareholders. Specialist (Structural technology), The Helsinki Housing Production Bureau (ATT), ; General Site Manager, Head of Site Management for renovation and residential construction, Haka, Skanska, Current positions of trust: Board Chairman: Rakennusmestarien Säätiö 5

6 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. CEO, LVI-Dahl Ltd ; CEO, Suomen LVI-Tukku Ltd ; Various positions, Huber Ltd, Current positions of trust: Senior Advisor, LVI-Dahl Ltd Caroline Sundewall Board member since Member of the Audit Committee. Born 1958, Swedish citizen, MBA Independent Business Consultant, Caroline Sundewall AB (since 2001) Deemed independent of the Company and its major shareholders. Business Commentator, Finanstidningen, ; Editor and Commentator, Sydsvenska Dagbladet (Business section) and Affärsvärlden ; Business Controller, Ratos AB, Current positions of trust: Board Chairman: Cloetta AB Board Member: Lifco AB, Hemfosa AB, Mertzig Asset Management and Södra Skogsägarna 6

7 Work of the Board of Directors in 2014 Cramo s Board meets regularly, according to a planned schedule. In 2014, the Board of Directors met sixteen times. Six of the meetings were held as a conference call and one meeting per capsulam. 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 2014, Cramo updated its strategy, renewed the Group s must-win battles and reconfirmed its financial targets. Cramo also completed selected acquisitions and refinanced its long-term credit agreements. In addition, Cramo began the implementation of the renewed must-win battles and completed performance improvement actions in certain business units. The performance in Central Europe and the progress of its transition programme was a specific follow-up issue. 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 in next chapters. 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 31 March 2014, the Audit Committee was chaired by Mr Eino Halonen, with Mr Victor Hartwall and Mr Esko Mäkelä as committee members. At its constitutive meeting on 1 April 2014, Mr Eino Halonen was appointed Chairman of the Audit Committee and Mr Victor Hartwall, Ms Caroline Sundewall and Mr Leif Boström were elected as members. Mr Halonen, Ms Sundewall and Mr Boström are deemed independent of the Company and its major shareholders. Mr Hartwall is deemed independent of the Company, but not independent of its major shareholders. The Audit Committee met three 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, 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 31 March 2014, the Nomination and Compensation Committee was chaired by Ms Helene Bistöm, with Mr Stig Gustavson, Mr Erkki Stenberg, Mr Jari Lainio, Mr Peter Therman and Mr Tom von Weymarn as members. At its constitutive meeting on 1 April 2014, Ms Helene Biström was appointed Chairman of the Nomination and Compensation Committee and Mr Raimo Seppänen, Mr Erkki Stenberg, Mr Peter Therman and Mr Tom von Weymarn were elected as members. Ms Biström and Mr 9

10 Stenberg are deemed independent of the Company and the major shareholders. Mr Seppänen is deemed independent of the Company, but not independent of its major shareholders. Mr Therman and Mr von Weymarn are not members of the Board of Directors. 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 Nomination and Compensation Committee Helene Biström Chairman 16 of 16-3 of 3 Eino Halonen Deputy 13 of 16 3 of 3 - Chairman Leif Boström Member 15 of 15 2 of 2 since 1 April Victor Hartwall Member 16 of 16 3 of 3 - Raimo Seppänen Member 14 of 15-2 of 2 since 1 April Erkki Stenberg Member 16 of 16-3 of 3 Caroline Sundewall Member 12 of 15 2 of 2 - since 1 April Stig Gustavson Chairman 1 of 1-1 of 1 until 31 March Jari Lainio Member 1 of 1-1 of 1 until 31 March Esko Mäkelä Member 1 of 1 1 of 1 - until 31 March Peter Therman External Committee Member of 3 Tom von Weymarn External Committee Member of 3 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 Directors. Further information regarding the President and CEO is available in the Annual Report and on the Company s website. 10

11 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 Fiskars Inha Ähtäri Works, Managing Director and Vice Managing Director , Morus Oy, Managing Director Current positions of trust: 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 HFM 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 reporting, 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 up- 11

12 dated 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 with enhanced target setting was a specific focus area in 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. 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 staff, 12

13 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 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 report- 13

14 ing. 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. The Board of Directors of Fortrent is responsible for the operative steering of the associated company Fortrent Oy operating in Russia and Ukraine. Fortrent Oy has its own corporate governance principles. Cramo monitors the financial performance of Fortrent and its development on a monthly basis. Fortrent steering group controls the shareholder interests and financing of Fortrent, meeting at least bi-annually, with the Group s CEO and CFO as members from the Cramo side. General development activities in internal control and risk management in 2014 The Group management team continued its work in translating operational excellence into action. New performance indicators were established, for example, for sales management, procurement and fleet management to ensure operational excellence in sales, process efficiency and capital efficiency. In addition, the Finance and Development function utilized the Group s risk appetite model in reassessing the Group s financial risks and in renewing the steering model of the treasury function. In order to advance the harmonisation and development of the Group s control and reporting, Cramo also continued the launch of the One Cramo Enterprise Rental application and further improved the Cramo Business intelligence (CraBi) reporting tool. The dynamic pricing model and there-related tools were taken into use in all Nordic countries. Internal control and risk management development activities related to financial reporting in 2014 In 2014, there was an overall emphasis specifically on pricing, cost control as well as capital expenditure and tax issues. Within the treasury function, key performance indicators were reassessed and a new steering model was taken into use. In order to further develop control maturity, the Group Internal Audit function continued to review key operative processes at Group level and in selected OpCos. In addition, OpCo follow-up reviews were conducted when required. Depot-level internal audits were continued as an on-going control activity. The Group s Finance and Development function also completed the implementation of the Group s new consolidation and reporting system. 14

15 Priority areas in 2015 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. The Group Finance and Development function will further develop the Group s performance management model in order to support the implementation of the must-win battle on Cramo Performance Management. A special attention will be paid both on the steering and monitoring of strategic key projects as well as everyday operative actions. The Group s business planning process will also be further developed. In 2015, the development of internal control will also include the monitoring of control activities in selected OpCos and Group functions. The selection of OpCos for review will be risk-based, and the review will be performed by Group financial management, Region Business controllers and the Group Internal Audit function. Improvement measures will be identified and implemented in order to further advance control maturity. The depot audit programme will continue as a sustained control activity. 15