Governance Information • Feb 21, 2018
Governance Information
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Fortum Corporation (FORTUM) has been listed on Nasdaq Helsinki since 18 December 1998. Fortum's industrial sector, according to the Global Industry Classification Standard, is Electric Utilities. The State of Finland is the majority owner in Fortum with 50.76% of the shares as of 31 December 2017.
Corporate governance at Fortum is based on Finnish laws and the company's Articles of Association. Fortum complies fully with and has prepared this corporate governance statement in accordance with the Finnish Corporate Governance Code 2015. The corporate governance statement is issued separately from the operating and financial review, and it has been reviewed by the Audit and Risk Committee of Fortum's Board of Directors.
Fortum prepares consolidated financial statements and interim reports in accordance with the International Financial Reporting Standards (IFRS), as adopted by the EU, the Finnish Securities Markets Act as well as the appropriate Financial Supervision Authority's regulations and guidelines and Nasdaq Helsinki's rules. The company's operating and financial review and the parent company financial statements are prepared in accordance with the Finnish Companies Act, Accounting Act, Securities Markets Act, and the opinions and guidelines of the Finnish Accounting Board.
The auditor's report covers the consolidated financial statements and the parent company financial statements. The Finnish Corporate Governance Code 2015 is available on the website of the Securities Market Association at http://www.cgfinland.fi
The decision-making bodies managing and overseeing the Group's administration and operations are the General Meeting of Shareholders, the Board of Directors with its two Committees, the Audit and Risk Committee and the Nomination and Remuneration Committee, and the President and CEO, supported by the Fortum Executive Management.
Fortum also has an informal Advisory Council consisting of representatives of Fortum's stakeholder groups as invited by the Board of Directors. The Advisory Council aims to advance Fortum's businesses by facilitating a dialogue and exchange of views between Fortum and its stakeholders. During 2017, the Advisory Council consisted of 14 representatives of Fortum's stakeholder groups and three employee representatives.
As sustainability is an integral part of Fortum's strategy, the highest decision making of these issues falls on the duties of the Board of Directors, who share joint responsibility on sustainability matters. Therefore Fortum has not established a specific Sustainability Committee for decision making on economic, environmental and social issues. The Audit and Risk Committee, members of the Fortum Executive Management, and other senior
executives support the Board of Directors in the decision-making in these matters, when necessary.
The General Meeting of Shareholders is the highest decision making body of Fortum. Every shareholder has the right to attend the General Meeting, propose items for the agenda of the General Meeting and exercise his/her power of decision in matters belonging to the General Meeting by law, as stipulated in the Finnish Companies Act. Each share is entitled to one vote. A shareholder who is present at the General Meeting of Shareholders also has the right to request information on matters to be considered at the meeting. Before the end of each financial year Fortum states on the Annual General Meeting website and in the Investor Relations calendar the date by which a shareholder must declare his/her proposals to the General Meeting.
Decisions at the General Meeting of Shareholders are primarily made by a simple majority of votes. Such decisions include, for example, resolutions on the adoption of the financial statements, payment of dividends, discharging the members of the Board of Directors and the President and CEO from liability, appointment of the Board of Directors and the external auditors, and deciding on their remuneration.
In accordance with Fortum's Articles of Association and the Finnish Companies Act, a notice to convene the General Meeting of Shareholders is issued by the Board of Directors. The notice is delivered no more than three months and no less than three weeks before the General Meeting of Shareholders by publishing the notice on the company's website or in two newspapers chosen by the Board of Directors. The Annual General Meeting of Shareholders is to be held once a year, in June at the latest.
An Extraordinary General Meeting of Shareholders shall be held whenever the Board of Directors finds it necessary or when it is required by law to convene such a meeting.
Fortum's Annual General Meeting was held at the Finlandia hall in Helsinki on 4 April. No Extraordinary General Meeting of Shareholders was held in 2017.
The Annual General Meeting on 9 April 2013 established a permanent Shareholders' Nomination Board. The purpose and task of the Shareholders' Nomination Board is to prepare and present to the Annual General Meeting, and, if necessary, to an Extraordinary General Meeting, a proposal on the remuneration, size and members of the Board of Directors. In addition, the Shareholders' Nomination Board seeks candidates for potential board members.
The Shareholders' Nomination Board consists of four members, three of which are appointed by the company's three largest shareholders, who shall appoint one member each. The Chairman of the Board of Directors serves as the fourth member. The members are nominated annually and their term of office ends when new members are nominated to replace them. Fortum's three largest shareholders that are entitled to appoint members to the Shareholders' Nomination Board are determined on the basis of the registered holdings as of the first working day in September in the year concerned. In the event that a shareholder does not wish to exercise their right to appoint a representative, it shall pass the right to the next-largest shareholder who would not otherwise be entitled to appoint a member to the Nomination Board. The Shareholders' Nomination Board forwards its proposals for the Annual General Meeting to the Board of Directors by 31 January each year.
The Shareholders' Nomination Board uses diversity principles for the Board of Directors in line with the Corporate Governance Code 2015. The principles are applied in preparing proposal concerning nomination of board members. The diversity principles include, among others, that the board composition shall include expertise from the geographical areas where Fortum conducts its business, the background profession of the board members shall include
such competences that support realisation of Fortum's strategy and that enable board members to challenge management decisions and to exercise their role of having oversight. In addition, the board composition shall include both genders. Fortum's target is to comply with the principles issued in the Government Resolution dated 17 February 2015 on equal gender representation in the boards of listed companies with the aim of the board consisting of at least 40% each of women and men by 2020. The Shareholders Nomination Board reviews the diversity principles and their implementation annually.
Fortum reports the objectives, actions and progress of the diversity principles in its corporate governance statement. The Shareholders' Nomination Board has applied the diversity principles in preparing the proposal concerning nomination of board members for the Annual General Meeting 2017 and for the upcoming Annual General Meeting of 2018. The Shareholders' Nomination Board deems that the current board composition and the proposed board members for the Annual General Meeting 2018 include all the competences defined in the diversity principles in well balanced manner.
The proposal for the board members for the Annual General Meeting 2018 consists of 3 women and 5 men. The current Board of Directors consists of 3 women and 4 men, corresponding to a ratio of 42.9% and 57.1%.
In October 2017, the following persons were appointed to the Shareholders' Nomination Board: Pekka Timonen, b. 1960, Doctor of Laws (LL.D.), Director General of Ministry of Economic Affairs and Employment (Chairman); Timo Ritakallio, b. 1962, D.Sc. (Tech.), LL.M., MBA, President and CEO, Ilmarinen Mutual Pension Insurance Company and Elli Aaltonen (b. 1953, D.Sc. (Soc.), docent, Director General, Social Insurance Institution of Finland (KELA). The Chairman of the Board of Directors, Sari Baldauf, acts as a member of the Shareholders' Nomination Board. The Nomination Board convened 4 times and the attendance rate was 100%.
The Shareholders' Nomination Board proposed to the Annual General Meeting 2018, which will be held on 28 March 2018, that the fees to be paid to the members of the Board of Directors are for a term ending at the end of the Annual General Meeting 2019 as follows: for the chairman, EUR 75,000 per year; for the deputy chairman, EUR 57,000 per year; and for each member, EUR 40,000 per year, as well as for the chairman of the Audit and Risk Committee EUR 57,000 per year if he/she is not at the same time acting as chairman or deputy chairman of the Board of Directors. In addition, for each Board of Directors and Board Committee meeting a fee of EUR 600 is proposed. For Board of Directors members living outside Finland in Europe, the proposed fee for each meeting will be doubled, and for Board of Directors members living outside Europe, the proposed fee for each meeting will be tripled. For Board of Directors members living in Finland, the proposed fee for each Board of Directors and Board Committee meeting will be doubled for meetings held outside Finland and tripled for meetings held outside Europe. For Board of Directors and Committee meetings held as a telephone conference, the proposed fee will be paid as single to all members. No fee will be paid for decisions made without a separate meeting.
In addition, the Shareholders' Nomination Board proposed that the Board of Directors consists of 8 members and that the following persons be elected to the Board of Directors for the upcoming term: Heinz-Werner Binzel, Eva Hamilton, Kim Ignatius, Matti Lievonen (chairman), Anja McAlister, Veli-Matti Reinikkala, and as new
members: Essimari Kairisto and Klaus-Dieter Maubach (deputy chaiman).
In September 2016, the following persons were appointed to the Shareholders' Nomination Board: Eero Heliövaara, b. 1956, M.Sc. (Econ.) and M.Sc. (Eng.), Director General of the Government Ownership Steering Department, Prime Minister's Office; Timo Ritakallio, b. 1962, D.Sc. (Tech.), LL.M., MBA, President and CEO, Ilmarinen Mutual Pension Insurance Company and Liisa Hyssälä, b. 1948, M.Sc. (Soc.), D.D.S., Director General, Social Insurance Institution of Finland (KELA). In addition, the Chairman of the Board of Directors, Sari Baldauf, was a member of the Shareholders' Nomination Board. The Nomination Board convened 3 times and the attendance rate was 100%.
Following the retirement of Liisa Hyssälä, Director General of KELA, her successor Elli Aaltonen (b. 1953, D.Sc. (Soc.), docent, Director General) replaced her as a member of the Shareholders' Nomination Board as of 1 January 2017. Ms Hyssälä participated in two meetings and Ms Aaltonen in one meeting.
The Shareholders' Nomination Board presented its proposal covering the members of the Board of Directors and the remuneration be paid to them, on 27 January 2017.
The Board of Directors is responsible for the company's strategic development and for supervising and steering the company's business and management. Further, under the Articles of Association and in line with the Companies Act, the Board of Directors represents the company and is responsible for the proper arrangement of the control of the company's accounts and finances. The Board of Directors is also responsible for defining the company's mission and values.
The Board of Directors comprises five to eight members who are elected at the Annual General Meeting for a one-year term of office expiring at the end of the first Annual General Meeting following
the election. The Annual General Meeting also elects the Chairman and the Deputy Chairman of the Board of Directors.
The Board of Directors convenes according to a previously agreed schedule to discuss specified themes and issues on its charter. The Chairman of the Board of Directors prepares the agenda for the Board of Directors meeting based on the proposal by the President and CEO. The members of the Board of Directors have the right to suggest specific matters and have them included on the agenda. More than half of the members must be present at the meeting to constitute a quorum. Decisions of the Board
of Directors shall be made by a simple majority. The Board of Directors has approved a written charter for its work, the main content of which is disclosed herein, including the duties of the Board of Directors.
The President and CEO, the Chief Financial Officer, and the General Counsel, as secretary to the Board of Directors, attend the Board meetings on a regular basis. Other Fortum Executive Management members and senior executives attend as required.
As part of its duties, the Board of Directors conducts an annual self-assessment in order to further develop its work. In
accordance with the Finnish Corporate Governance Code, the Board of Directors also annually evaluates which of the directors are independent of the company and which are independent of its significant shareholders.
Until the Annual General Meeting held on 4 April 2017, the Board of Directors comprised the following eight members: Chairman Sari Baldauf, Deputy Chairman Kim Ignatius, Minoo Akhtarzand, Heinz-Werner Binzel, Eva Hamilton, Tapio Kuula, Veli-Matti Reinikkala and Jyrki Talvitie.
The Annual General Meeting on 4 April 2017 re-elected Ms Sari Baldauf as Chairman, and Mr Heinz-Werner Binzel, Ms Eva Hamilton, Mr Kim Ignatius, Mr Tapio Kuula and Mr Veli-Matti Reinikkala as Members, in addition as new members Mr Matti Lievonen as Deputy Chairman, and Ms Anja McAlister as member until the end of the Annual General Meeting in 2017. In November 2017, Tapio Kuula passed away. After evaluation, the Shareholders' Nomination Board confirmed the Board of Directors' ability to function with 7 members until the Annual General Meeting 2018.
The Chairman, the Deputy Chairman and the members of the Board of Directors were, with the exception of Tapio Kuula (Mr. Kuula acted as President and CEO of Fortum until 31 January 2015), independent of the company and all were independent of the company's significant shareholders. Three members, including the Chairman, are female and four members are male.
The Board of Directors met 17 times, and the attendance rate was 97%.
The Board of Directors focused especially on the development and implementation of the company's strategy, growth options, investments and acquisitions, including the Hafslund and Uniper transactions. Other focus areas included the market outlook and market development, as well as Fortum's competitiveness in the energy market transition. Based on the self-assessment conducted during the previous year, the Board of Directors set certain focus areas and amended certain processes in an effort to further enhance the efficiency of the board work.
| Born | Nationality | Education | Occupation Member since | Attendance at Board Meetings |
Attendance at Board Committee Meetings |
Share ownership (31 Dec 2017) |
||
|---|---|---|---|---|---|---|---|---|
| Non-executive director, | ||||||||
| Independent member of the | Nomination and Remuneration | |||||||
| Ms Sari Baldauf, Chairman | 1955 | Finnish | M.Sc. (Econ.) | Board of Directors Independent consultant, Non |
2009 | 17/17 | Committee, 4/4 | 2,300 |
| Economics and electrical | executive director, Independent | |||||||
| Mr Heinz-Werner Binzel | 1954 | German | engineering degree | member of the Board of Directors | 2011 | 17/17 | Audit and Risk Committee, 5/5 | 0 |
| Non-executive director, Independent member of the |
Nomination and Remuneration | |||||||
| Ms Eva Hamilton | 1954 | Swedish | B.A. Journalism | Board of Directors | 2015 | 16/17 | Committee, 4/4 | 40 |
| Non-executive director, | ||||||||
| Independent member of the | ||||||||
| Mr Kim Ignatius | 1956 | Finnish | B.Sc. (Econ.) | Board of Directors Non-executive Director, |
2012 | 17/17 | Audit and Risk Committee, 5/5 Audit and Risk Committee, 5/5, |
2,400 |
| Independent member of the | Nomination and Remuneration | |||||||
| Mr Veli-Matti Reinikkala | 1957 | Finnish | Executive MBA | Board of Directors | 2016 | 17/17 | Committee, 1/1 | 3,000 |
| Member of Fortum's Board of Directors since 4 April 2017 | ||||||||
| President & CEO of Neste | ||||||||
| Mr Matti Lievonen, Deputy Chairman | 1958 | Finnish | B.Sc. (Eng.), Executive MBA | Corporation, Independent member of the Board of Directors |
2017 | 11/13 | Nomination and Remuneration Committee, 3/3 |
1,500 |
| Pöyry PLC, Head of | ||||||||
| Transformation and Strategy, | ||||||||
| Ms Anja McAlister | 1960 | Finnish | M.Sc. (Energy technology), MBA | Independent member of the Board of Directors |
2017 | 13/13 | Audit and Risk Committee, 4/5 | 0 |
| Member of Fortum's Board of Directors until 7 November 2017 | Non-executive director, | |||||||
| Independent of the significant | ||||||||
| shareholders, not independent of | Nomination and Remuneration | |||||||
| Mr Tapio Kuula | 1957 | Finnish | M.Sc. (Eng.) M.Sc. (Econ.) | the company | 2015 | 14/15 | Committee, 2/3 | - |
| Member of Fortum's Board of Directors until 4 April 2017 | ||||||||
| Governor in the County of Västmanland, Independent |
||||||||
| Ms Minoo Akhtarzand | 1956 | Swedish | M.Sc. (Electrical Engineering) | member of the Board of Directors | 2011 | 4/4 | - | |
| Sperbank, Vice President, | ||||||||
| Strategic Partners and Investors, Independent member of the |
||||||||
| Mr Jyrki Talvitie | 1966 | Finnish | Executive MBA, LL.M. | Board of Directors | 2014 | 4/4 | - |
The committees of the Board of Directors are the Audit and Risk Committee and the Nomination and Remuneration Committee. The committees assist the Board of Directors by preparing and reviewing in more detail matters falling within the duties of the Board of Directors.
The Board of Directors appoints members of the Audit and Risk Committee and the Nomination and Remuneration Committee from amongst its members. Each committee shall have at least three members. The members shall have the expertise and experience required by the duties of the respective committee.
Members are appointed for a one-year term of office expiring at the end of the first Annual General Meeting following the election. All the members of the Board of Directors have the right to attend the committee meetings. The Chairman of the committee reports on the committee's work to the Board of Directors regularly after each meeting, and the committee meeting materials and minutes are available to all members of the Board of Directors. The Board of Directors has approved written charters for the committees; the charters are reviewed regularly and updated as needed.
The Audit and Risk Committee assists the Board of Directors in matters relating to financial reporting and control in accordance with the duties specified for audit committees in the Finnish Corporate Governance Code. The Board of Directors regularly determines the role and duties of the Audit and Risk Committee in a written charter. The committee monitors the Group's reporting process of financial statements and the efficiency of the internal controls, internal audit and risk management systems. In addition, the committee monitors and assesses the legal compliance and the business ethics compliance.
Pursuant to the Finnish Corporate Governance Code, the members of the Audit and Risk Committee shall have the qualifications necessary to perform the responsibilities of the committee, and at least one of the members shall have expertise specifically in accounting, bookkeeping or auditing. The members shall be independent of the company, and at least one member shall be independent of the company's significant shareholders.
The external auditors, Chief Financial Officer, Head of Internal Audit, Corporate Controller, and General Counsel, as secretary to the committee, attend the committee meetings on a regular basis. Other senior executives attend the meetings as invited by the committee.
The Audit and Risk Committee carries out a self-assessment of its work and approves the internal audit charter and the internal audit plan and its budget. The committee evaluates the independence of the external auditors, reviews the external auditor's audit plan and meets with them regularly to discuss the audit plan, audit reports and findings.
After the Annual General Meeting on 4 April 2017, the Board of Directors elected from amongst its members to the Audit and Risk Committee Kim Ignatius as Chairman and Heinz-Werner Binzel, Anja Mc Alister and Veli-Matti Reinikkala as members. Until the Annual General Meeting on 4 April 2017, the committee comprised Kim Ignatius as the Chairman, Minoo Akhtarzand, Heinz-Werner Binzel and Jyrki Talvitie as members.
In 2017, the members were all independent of the company and of its significant shareholders. The Audit and Risk Committee met 5 times in 2017 and the attendance rate was 95%.
The Nomination and Remuneration Committee assists the Board of Directors in issues related to nomination and remuneration of the company's management. The committee has a written charter in which its duties have been defined. Pursuant to the Finnish Corporate Governance Code, the majority of the members of a remuneration committee shall be independent of the company. The regular participants at the committee meetings are the President and CEO, Senior Vice President of Strategy, People and Performance, and General Counsel as Secretary to the Committee.
The Nomination and Remuneration Committee conducts annually a self-evaluation of its work.
After the Annual General Meeting on 4 April 2017, the Board of Directors elected from amongst its members to the Nomination and Remuneration Committee Matti Lievonen as Chairman and Sari Baldauf, Eva Hamilton and Tapio Kuula as members. Until the Annual General Meeting on 4 April 2017, the committee comprised Sari Baldauf as the Chairman and Eva Hamilton, Tapio Kuula and Veli-Matti Reinikkala as members.
In 2017, the members were all independent of the company, with the exception of Tapio Kuula (Mr Kuula acted as President and CEO of Fortum until 31 January 2015), and of its significant shareholders. The committee met 4 times during 2017 and the attendance rate was 93%.
Mr. Pekka Lundmark is the President and CEO of Fortum Corporation. The President and CEO holds the position of Managing Director under the Companies Act and is the Chairman of the Fortum Executive Management. The President and CEO is in charge of the day-to-day management of the Group, in accordance with the Companies Act and the instructions and orders issued by the Board of Directors. Under the Companies Act, the President and CEO is responsible for ensuring that the accounts of the company comply with the applicable laws and that its financial affairs have been arranged in a reliable manner.
The President and CEO is supported by the Fortum Executive Management. The Fortum Executive Management assists the President and CEO in implementing the strategic and sustainability targets within the framework approved by the Board of Directors, preparing the Group's business plans, and deciding on investments, mergers, acquisitions and divestments within its authorisation.
Financial and sustainability results are reviewed in the monthly reporting by the Fortum Executive Management. Quarterly Performance Review meetings with the management are embedded in the Fortum Performance Management process.
Each member of the Fortum Executive Management is responsible for the day-to-day operations and the implementation of operational decisions in their respective organisations. The Fortum Executive Management meets on a monthly basis.
In February 2017, Fortum announced that it will reorganise the Group structure as of 1 March 2017. City Solutions was divided into two divisions, City Solutions and Consumer Solutions. The target of the new organisation was to enable the implementation of the company's vision and strategy announced on 3 February 2016. The new organisation comprises four divisions: Generation, City Solutions, Consumer Solutions and Russia. In addition, there are two development units focusing on growing new businesses: M&A and Solar & Wind Development and Technology and New Ventures. In addition, the organisation has four staff functions: Finance; Legal; Strategy, People and Performance; as well as Corporate Affairs and Communications.
At the same time, Fortum announced changes in the company's executive management team. Markus Rauramo, Executive Vice President, City Solutions was appointed Chief Financial Officer of the company following Timo Karttinen's resignation from his CFO duties and Per Langer was appointed Executive Vice President, City Solutions. Mikael Rönnblad, M.Sc. (Econ.) was appointed Executive Vice President heading the new Consumer Solutions division and member of Fortum's Executive Management as of 15 May 2017.
On 31 October 2017, Matti Ruotsala, Deputy CEO retired from the company.
Generation division is responsible for the large scale power production, physical optimisation and trading activities in the Nordic area. The division comprises nuclear, hydro and thermal power production, portfolio management and trading, industrial intelligence and nuclear services.
City Solutions is responsible for developing sustainable city solutions into a growing business for Fortum. The segment comprises heating and cooling, waste-to-energy, biomass and other circular economy solutions. The business operations are located in the Nordics, the Baltic countries and Poland.
Consumer Solutions provides electricity and gas products, and develops new digital services and solutions for consumers. The segment comprises electricity sales and customer services in the Nordics and in Poland, as well as gas sales in Poland.
Russia division comprises Fortum's power and heat generation and sales activities in Russia.
Technology and New Ventures unit is responsible for Fortum's research and development activities and is the in-house incubator for start-ups. It is also responsible for direct and indirect investments in external start-ups as well as cooperation with universities and research institutions.
M&A and Solar & Wind Development is responsible for Fortum's mergers and acquisitions activities and developing Fortum's solar and wind portfolio.
| Share ownership | |||||
|---|---|---|---|---|---|
| Position and responsibility area | Born | Education | Member since | 31 December 2017 | |
| President and CEO, Chairman of the Fortum Executive | |||||
| Mr Pekka Lundmark | Management | 1963 | M.Sc. (Eng.) | 2015 | 60,713 |
| Mr Alexander Chuvaev | Executive Vice President, Russia Division | 1960 | M.Sc. (Eng.) | 2009 | 14,713 |
| Mr Kari Kautinen | Senior Vice President, M&A and Solar & Wind Development | 1964 | LL.M. | 2014 | 30,720 |
| Mr Per Langer | Executive Vice President, City Solutions | 1969 | M.Sc. (Econ.) | 2009 | 31,570 |
| Mr Risto Penttinen | Senior Vice President, Strategy, People and Performance | 1968 | M.Sc. (Econ.) | 2016 | 10,588 |
| Mr Markus Rauramo | Chief Financial Officer | 1968 | M.Sc. (Econ. and Pol. Host.) | 2012 | 32,032 |
| Senior Vice President, Corporate Affairs and | |||||
| Mr Arto Räty | Communications | 1955 | Lieutenant General (Ret.) | 2016 | 0 |
| Mr Mikael Rönnblad | Executive Vice President, Consumer Solutions | 1969 | M.Sc. (Econ.) | 15 May 2017 | 0 |
| Ms Sirpa-Helena Sormunen | General Counsel | 1959 | LL.M. | 2014 | 4,777 |
| Ms Tiina Tuomela | Executive Vice President, Generation | 1966 | M.Sc. (Eng.), MBA | 2014 | 15,554 |
| FEM member until 28 February 2017 | |||||
| Mr Timo Karttinen | Chief Financial Officer | 1965 | M.Sc. (Eng.) | 2004 | - |
| FEM member until 31 October 2017 | |||||
| Mr Matti Ruotsala | Deputy CEO | 1956 | M.Sc. (Eng.) | 2009 | - |
All the members of the Executive Management Team report to the President and CEO, apart from the General Counsel who administratively reports to the CFO.
Reporting
The internal control and risk management systems relating to financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and aim to ensure compliance with applicable laws and regulations.
Fortum's Board of Directors approves the Group Risk Policy that defines the objective, main principles and division of responsibilities for risk management. The Group Risk Policy also includes a description of the main features of the risk management process which is applicable to all processes including financial reporting.
Fortum's internal control framework is based on the main elements from the framework introduced by the Committee of Sponsoring Organisations of the Treadway Commission (COSO). The controls including financial reporting controls, have been defined based on the main risks in the process. Internal controls are an integral part of compliance in Fortum covering key areas of business ethics, regulatory compliance and internal controls.
G
overnance
10
| Steering Confirming Group principles and policies Approving external financial reporting |
Board of Directors | ||||
|---|---|---|---|---|---|
| Monitoring Supervising external financial reporting process Reviewing the external and internal audit work and reporting |
Audit and Risk Committee | ||||
| Delegate, execute and monitor Business planning Management reporting Performance reporting |
Fortum Executive Management | ||||
| Design, communication and monitoring of the control framework Group instructions and Controllers manual Regular controller meetings and expert forums |
Finance and controlling |
Risk Management |
IT & Security application controls |
||
| Implementing measures and performing the controls Reporting and analysing Assessment of operating eectiveness of controls |
Divisions, business areas and sta/ service units |
The standards, processes and structures in internal control are set through Group policies, Group instructions and the Fortum internal control framework. Fortum's internal control framework is designed to support operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations and policies. The internal control framework defines the key controls and minimum requirements for the key processes. During 2017, Group Instruction for Compliance Management was implemented also describing the roles and responsibilities in terms of internal controls. Corporate Accounting and Control is responsible for the overall control structure of the financial reporting process. Fortum Controllers' manual defines instructions and guidelines relating to financial reporting.
Fortum's organisation is decentralised, and a substantial degree of authority and responsibility is delegated to the divisions in the form of control responsibilities. Fortum's control governance follows the so-called "Three lines of defense" model as illustrated in the graphic.
Risks are continuously identified and analysed as part of the risk management process. Material risks, that might, if realised, have financial impact or lead to non-compliance are reported at least annually to the ARC, and follow-up of actions and improvements are integrated in operational management. The currently ongoing Internal Controls Quality Programme is to review and enhance
existing controls to ensure that the key risks in the processes are mitigated.
Control activities are applied in the processes and, from the financial reporting perspective, they ensure that errors or deviations are prevented or detected and corrected.
The Corporate Accounting and Control unit together with the Record-to-Report internal controls process team determine the control requirements and the scope covering the financial reporting process. Divisions and units define their controls based on these common requirements. Responsibilities are assigned for the control activities and for ensuring that the control coverage is in accordance with the defined requirements and scope.
Control requirements for the financial reporting process include controls regarding the initiation, recognition, measurement, approval, accounting and reporting of financial transactions as well as disclosure of financial information. The general IT controls support the financial reporting controls in areas like access control and back-up management.
Responsibilities are assigned to finance functions ensuring that analyses of the business performance, including analyses on volumes, revenues, costs, working capital, and asset values are performed in accordance with the control requirements.
The Controllers' manual includes the Fortum Accounting manual, Investment manual and reporting instructions, and other instructions relating to financial reporting. Regular core controllers' meetings, headed by the Corporate Controller, steer the Finance function. Regular Accounting Network Forum meetings are to inform about upcoming changes in IFRS, new accounting policies and other changes in reporting requirements.
Financial performance and key short-term risks and uncertainties related to business operations are reported monthly to the Fortum Executive Management.
As part of the Fortum internal control framework, divisions and units regularly assess the maturity of the control activities they are responsible for including the financial reporting process controls. The Head of Internal Controls reports the maturity assessments results and improvement actions to the management and to the ARC. Internal control design and operating effectiveness are also assessed as part of the audits by Internal Audit. Audit results, including corrective actions and their status, are regularly reported to the management and to the Audit and Risk Committee.
Fortum's Internal Audit is an independent and objective assurance function that is responsible for examining and evaluating the appropriateness and effectiveness of the Group's management and corporate governance processes, internal control system, risk management, and operational processes. The Standards for the Professional Practice of Internal Audit form the basis for the work of Internal Audit.
The Group and the parent company have one external auditor, which shall be an audit firm certified by the Central Chamber of Commerce. Due to ongoing mergers and acquisition processes some of the target companies have other audit firms during the transition period. The external auditor is elected by the Annual General Meeting for a term of office that expires at the end of the first Annual General Meeting following the election.
Fortum's Annual General Meeting on 4 April 2017 elected Authorised Public Accountant Deloitte Oy as the company's external auditor, with Authorised Public Accountant Reeta Virolainen having the principal responsibility.
The Annual General Meeting decided on 4 April 2017 that the auditor's fee be paid pursuant to invoice approved by the company. The fee paid to the auditor for services rendered and invoiced
in 2017 totalled approx. EUR 1,448,000. In addition, the audit
firm was paid a total of approx. EUR 1,158,000 for non-audit and advisory services rendered and invoiced.
Fortum's Code of Conduct is based on the shared corporate values which form the ethical basis for all work at Fortum. Fortum values were updated in 2017. Fortum's Code of Conduct was rebranded and relaunched in 2017 (originally launched in 2007 and updated 2015) to whole company, including Recycling and Waste Solutions and Hafslund, and is published in ten languages. The Code of Conduct has been approved by the Board of Directors. Fortum employees are responsible for reporting any suspected misconduct to their own supervisors, to other management members or, if necessary, directly to Internal Audit. Additionally, Fortum employees and partners can report suspicions of misconduct confidentially to the Fortum Head of Internal Audit via the "raise-a-concern channel" on Fortum's internal and external web pages. The report can be submitted in several languages and anonymously if necessary. In Russia, Fortum even has a separate compliance organisation with compliance officers in place.
Prevention of corruption is one of the Code of Conduct's focus areas. Fortum has procedures for anti-corruption including prevention, oversight, reporting and enforcement based on the requirements prescribed in international legislation. Fortum also has a country and partner risk evaluation process to support the understanding and management of compliance needs at the local business and partner level. These also cover export control and antimoney laundering aspects.
Fortum has a compliance programme which covers key areas of regulatory compliance and business ethics. It is managed with risk-based prioritisation. Internal Controls are integral part of the compliance and both the Group Compliance Officer and the Head of Internal Controls report to the General Counsel independently of the business.
The Code of Conduct and compliance topics and instructions are communicated through internal and external communication channels. Alignment is enforced by top management with their full commitment.
Fortum complies with the EU regulation No. 596/2014 on market abuse (MAR) and EU regulation No. 1227/2011 on wholesale Energy Market Integrity and Transparency (REMIT) and related regulation. Fortum complies also with the Guidelines for Insiders issued by Nasdaq Helsinki.
Persons discharging managerial responsibilities and the persons associated with them are under a duty to disclose their transactions with Fortum's financial instruments. Fortum has defined persons discharging managerial responsibilities to be the members of the Board of Directors and Fortum Executive Management.
Fortum's Board of Directors and Executive Management members as well as persons related to them are under a disclosure duty towards Fortum and the Finnish Financial Supervision Authority regarding their transactions with Fortum's financial instruments. Fortum makes the said transactions public with a stock exchange release.
Fortum's Board of Directors and Executive Management members as well as other Fortum personnel defined to have access to sensitive financial information of Fortum may not trade in Fortum's financial instruments within 30 days prior to the publication of interim reports and financial statements (Closed Window).
Fortum's own internal insider rules are regularly updated and made available to all employees of Fortum. Fortum arranges training on insider rules. The coordination and control of insider affairs are included in the responsibilities of Fortum's General Counsel. Fortum regularly monitors the trading of its insiders.
Primary work experience: • Nokia Corporation, several senior executive positions. Member of the Group Executive Board until 2005
Born 1955, nationality: Finnish
M.Sc., Business Administration, honorary doctorate degrees in Technology (Helsinki University of Technology) and Business Administration (Turku School of Economics and Business Administration, and Aalto University School of Business)
Independent member of Fortum's Board of Directors since 2009
Member of the Nomination and Remuneration Committee
Fortum shareholding on 31 December 2017: 2,300 (31 December 2016: 2,300)
Born 1958, nationality: Finnish
B.Sc. (Eng.), eMBA, D.Sc. (Tech.) h.c.
Independent member of Fortum's Board of Directors since 2017
Chairman of the Nomination and Remuneration Committee
Fortum shareholding on 31 December 2017: 1,500 (31 December 2016: not disclosed)
President & CEO, Neste Corporation
President of the Fine and Speciality Papers Division at UPM-Kymmene Corporation, and number of other senior positions at UPM 1986–2008, and prior to that at ABB, Member of UPM-Kymmene's Executive Board 2002–2008
European Business Leaders' Convention, Member of the Board
East Office of Finnish Industries Oy, Member of the Board
Chemical Industry Federation of Finland, Member of the Board
Born 1954, nationality: German
Economics and Electrical Engineering degree
Independent member of Fortum's Board of Directors since 2011
Member of the Audit and Risk Committee
Fortum shareholding on 31 December 2017: 0 (31 December 2016: 0)
Main occupation: Independent consultant
• TÜV Rheinland Holding AG, Member of the Supervisory board, Chairman of the Audit Committee
Born 1954, nationality: Swedish
B.A. Journalism, honorary doctorate degree at Mid Sweden University (Mittuniversitetet)
Independent Member of Fortum's Board of Directors since 2015
Member of the Nomination and Remuneration Committee
Fortum shareholding on 31 December 2017: 40 (31 December 2016: 40)
Aftonbladet 1978–1979, Svenska Dagbladet 1979– 1988, Dagens Industri 1988–1989: news reporter
Nexiko Media AB, Chairman of the Board
Main occupation: Non-executive Director
President 2017 • TeliaSonera AB, Executive Vice President and CFO
2003–2008 • Sonera Oyj, Executive Vice President and CFO
2000–2002 • Tamro Oyj, Group CFO 1997–2000
Primary work experience: • Sanoma Corporation, Chief Financial Officer 2008–2016, Executive Vice
Born 1956, nationality: Finnish
BSc (Econ), Helsinki School of Economics and Business Administration
Independent member of Fortum's Board of Directors since 2012
Chairman of the Audit and Risk Committee
Fortum shareholding on 31 December 2017: 2,400 (31 December 2016: 2,400)
M.Sc., Energy technology, MBA Independent member of
Fortum's Board of Directors since 2017
Born 1960, nationality: Finnish
Anja McAlister
Member of the Audit and Risk Committee
Fortum shareholding on 31 December 2017: 0 (31 December 2016: not disclosed)
Main occupation: Head of Transformation and Strategy, Pöyry PLC
Electrowatt-Ekono Oy (part of the Pöyry Group), Senior Vice President, Head of the Management Consulting Northern Europe 2000– 2004
Ministry of Trade and Industry, Finland, Industrial Counsellor, Head of Energy Policy & Analyses team 1998-2000
15
Born 1957, nationality: Finnish
Executive Master of Business Administration
Independent Member of Fortum's Board of Directors since 2016
Member of the Audit and Risk Committee
Fortum shareholding on 31 December 2017: 3,000 (31 December 2016: 3,000) Main occupation: Non-executive Director
• ABB, President of Region Europe 2015 and Member of the Group Executive Committee 2006–2015
• ABB, President of Process Automation division 2006– 2014, Head of Business Area Process Automation 2005
ABB Drives, Manager, 1996–2002
ABB Industry Oy, CFO 1994–1996
Before 1994, various positions in paper and packaging companies in Finland
Cramo Plc, Chairman of
Born 1963, nationality: Finnish
M.Sc. (Eng.)
Member of the Executive Management Team since 2015 Employed by Fortum since 2015 President and CEO since 2015
Fortum shareholding on 31 December 2017: 60,713 (31 December 2016: 56,250)
Born 1960, nationality: Russian
Alexander Chuvaev Executive Vice President
M.Sc. (Eng.)
Member of the Executive Management Team since 2009 Employed by Fortum since 2009
Russia Division and General Director of PAO Fortum since 2009
Fortum shareholding on 31 December 2017: 14,713 (31 December 2016: 14,713)
Russia Division
Executive Vice President,
Born 1964, nationality: Finnish
LL.M
Member of the Executive Management Team since 2014 Employed by Fortum since 1998 Senior Vice President, M&A and Solar & Wind Development since 2016
Fortum shareholding on 31 Dec 2017: 30,720 (31 December 2016: 29,246)
positions 1998–2007
M.Sc. (Econ.)
Swedish
Member of the Executive Management Team since 2009 Employed by Fortum since 1999 Executive Vice President, City Solutions as of 1 March 2017
Born 1969, nationality:
Per Langer
City Solutions
Executive Vice President
Fortum shareholding on 31 December 2017: 31,570 (31 December 2016: 29,212)
Previous positions:
• Gullspång Kraft, managerial positions 1997–1999
Born in 1968, nationality: Finnish
M.Sc. (Economics)
• Varma Mutual Pension Insurance Company, Member of the Supervisory Board
Born 1968, nationality: Finnish
M.Sc. (Econ. and Pol. Hist.)
Member of the Executive Management Team since 2012 Employed by Fortum since 2012 Chief Financial Officer as of 1 March 2017
Fortum shareholding on 31 December 2017: 32,032 (31 December 2017: 27,847)
• Enso Oyj, Helsinki, several financial tasks 1993–1999
Born 1955, nationality: Finnish
Lieutenant General (Ret.)
Member of the Executive Management Team since 2016 Employed by Fortum since 2016 Senior Vice President, Corporate Affairs & Communications since 2016
Fortum shareholding on 31 December 2017: 0 (31 December 2016: 0)
• Permanent Secretary at the Ministry of Defence of Finland 2011–2015 and Director of the National Defence Policy Unit 2005– 2008
Various positions within Finnish Defence Forces including:
Brussels, Belgium, 1994– 1997
Mikael Rönnblad Executive Vice President
M.Sc. (Econ.)
Member of the Executive Management Team as of 15 May 2017 Employed by Fortum since 15 May 2017 Executive Vice President, Consumer Solutions as of 15 May 2017
Fortum shareholding on 31 December 2017: 0 (31 December 2016: not disclosed)
Sonera Corporation, Manager, Corporate Venturing and International Mobile Operations 1997– 2000
Hanken Swedish School of Economics, Project Director and Assistant Professor (acting) 1995–1997
• Nikus Oy Ab, Chairman of the Board
Consumer Solutions
Born 1959, nationality: Finnish
LL.M, Trained on the bench
Member of the Executive Management Team since 2014 Employed by Fortum since 2014 General Counsel since 2014
Fortum shareholding on 31 December 2017: 4,777 (31 December 2016: 3,000)
Born 1966, nationality: Finnish
Tiina Tuomela Executive Vice President
M.Sc. (Eng.), MBA
Generation
Member of the Executive Management Team since 2014 Employed by Fortum since 1990 Executive Vice President, Generation since 2016
Fortum shareholding on 31 December 2017: 15,554 (31 December 2016: 12,991)
Generation 2005–2009 • Fortum, several managerial positions 1990–2005
Kemijoki Oy, Chairman of the Board
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