Governance Information • Feb 24, 2016
Governance Information
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| CORPORATE GOVERNANCE STATEMENT 2015 | 3 |
|---|---|
| GROUP MANAGEMENT | 9 |
| RISK MANAGEMENT | 12 |
| REMUNERATION REPORT | 15 |
Kemira Oyj's corporate governance is based on the Articles of Association, the Finnish Companies Act and Nasdaq Helsinki Ltd.'s rules and regulations on listed companies.
Kemira complies with the Finnish Corporate Governance Code, which is publicly available at www.cgfinland.fi. The Corporate Governance Code 2015 has become effective as of January 1, 2016. During the financial year 2015 Kemira has complied with the Finnish Corporate Governance Code 2010, which preceded the Corporate Governance Code 2015. This statement has been prepared in accordance with the Corporate Governance Code 2010.
This statement is presented separately from the annual report by the Board of Directors.
Kemira's Audit Committee has reviewed the Corporate Governance Statement, and the Company's Auditor, Deloitte & Touche Oy, has checked that the statement has been issued and that the description of the main features of the internal control and risk management related to the financial reporting process included in the statement is consistent with the Financial Statements.
The Shareholders' Meeting, the Board of Directors and the Managing Director are responsible for Kemira's management and operations. Their tasks are defined based on the Finnish Companies Act and Kemira's Articles of Association.
Kemira Oyj's shareholders' meeting, or the General Meeting, the Company's highest decision-making body, is held at least once a year. The Annual General Meeting (AGM) must be held each year by the end of May.
The AGM makes decisions on matters within its competence under the Companies Act and the Articles of Association, such as the adoption of the financial statements and dividend payout, the discharge of Board members and the Managing Director and his Deputy from liability, the election of the Chairman, Vice Chairman and other members of the Board of Directors and their emoluments, and the election of the auditor and the auditor's fees.
Notice to the shareholders' meeting shall be released on the Company's website no earlier than two months and no later than three weeks before the meeting, however, at least nine days before the record date of the meeting. Additionally, if so decided by the Board of Directors, the Company may publish the notice to the shareholders' meeting in one nationwide newspaper.
Kemira Oyj's Annual General Meeting was held in Helsinki on March 23, 2015. The meeting was attended by 634 shareholders either in person or by proxy, together representing around 59% of the shareholders' votes. The documents related to the AGM are available on Kemira's website www.kemira.com > Investors > Corporate governance > Annual General Meeting.
The 2012 Annual General Meeting decided to establish a Nomination Board consisting of the shareholders or the representatives of the shareholders to prepare annually a proposal for the next AGM concerning the composition and remuneration of the Board of Directors.
The Nomination Board consists of the representatives of the four largest shareholders of Kemira Oyj based on the situation on August 31 preceding the AGM, and the Chairman of Kemira Oyj's Board of Directors acts as an expert member. As of August 31, 2015, the members of the Nomination Board are Pekka Paasikivi, Chairman of the Board of Oras Invest Oy, Kari Järvinen, Managing Director of Solidium Oy, Risto Murto, President & CEO, Varma Mutual Pension Insurance Company, Timo Ritakallio, President & CEO, Ilmarinen Mutual Pension Insurance Company, and the Chairman of the Board Jari Paasikivi as an expert member.
The Nomination Board met three times in 2015 with an attendance rate of 100%.
The AGM elects the Chairman, Vice Chairman and other members of the Board of Directors. In accordance with the Articles of Association, the Board of Directors comprises 4–8 members. On March 23, 2015, the Annual General Meeting elected six members to the Board of Directors. The AGM re-elected Wolfgang Büchele, Winnie Fok, Juha Laaksonen, Timo Lappalainen, Jari Paasikivi and Kerttu Tuomas to the Board of Directors. Jari Paasikivi was elected the Board's Chairman and Kerttu Tuomas was elected the Vice Chairman.
All of the Board members are independent of the Company except for Wolfgang Büchele who has been the Managing Director of Kemira Oyj as of April 1, 2012 until April 30, 2014. The Board members are also independent of significant shareholders of the Company except for the Chairman Jari Paasikivi. Jari Paasikivi is the CEO of Oras
Invest Oy and Oras Invest Oy owns 18.2% of Kemira Oyj's shares. The personal information concerning the members of the Board of Directors can be found in the section Group Management and their holdings can be found under the heading Insiders.
According to the Articles of Association, the Board of Directors is tasked with duties within its competence under the Companies Act. It has drawn up a written Charter defining its key duties and procedures. The following is a description of the essential contents of the Charter.
The Board of Directors is in charge of corporate governance and the due organization of the Company's operations. It decides on convening and prepares the agenda for the shareholders' meeting and ensures the practical implementation of decisions taken thereby. In addition, the Board of Directors decides on authorizations for representing the Company. The Board of Directors' key duties include matters which, in view of the scope and type of the Company's operations, are uncommon or involve wide-ranging effects. These include establishing the Company's long term goals and the strategy for achieving them, approving the annual business plans and budget, defining and approving corporate policies in key management control areas, approving the Company's organizational structure and appointing the Managing Director, his Deputy and members of the Management Board. The Board of Directors approves the Company's capital investment policy and major investments, acquisitions and divestments. It also approves the group treasury policy and major long term loans and guarantees issued by the Company.
The Board's duties include ensuring that the Company has adequate planning, information and control systems and resources for monitoring result and managing risks in operations. The Board of Directors monitors and evaluates the performance of Managing Director, his Deputy and members of the Management Board and decides upon their remuneration and benefits. The Board's duty is to ensure continuation of the business operations by succession planning for key persons. The Board defines and approves the main principles for the incentive bonus systems within the Company.
The Board of Directors also manages other tasks within its competence under the Companies Act. It is responsible for the due organization of the supervision of the Company's accounting and asset-liability management. The Board of Directors sees to it that the Company's financial statements give a true and fair view of the Company's affairs and that the consolidated financial statements are prepared under the International Financial Reporting Standards (IFRS) and the parent company's financial statements under the acts and regulations in force in Finland (FAS). The Board of Directors' meetings discuss the Company's profit performance at monthly level. The Board of Directors discusses the Company's audit with the auditor. The Board of Directors evaluates its performance and working methods on an annual basis.
In 2015, the Board of Directors met 12 times. The average attendance rate at the meetings was 98.6%.
Remuneration of the Board of Directors is described in section Remuneration Report.
Kemira Oyj's Board of Directors has appointed two committees: the Audit Committee and the Personnel and Remuneration Committee.
The Audit Committee works in accordance with its Charter confirmed by the Board of Directors. It is tasked to assist the Board of Directors in fulfilling its oversight responsibilities for financial reporting process, the system of internal control, the audit process and Kemira's process for monitoring compliance with laws and regulations and the Kemira Code of Conduct. The Committee reports to the Board on each meeting.
The Audit Committee consists of three members independent of the Company, out of which at least one member shall also be independent of significant shareholders. elected by the Board of Directors from amongst its members. After the 2015 AGM, the Board elected Juha Laaksonen as the Chairman and Jari Paasikivi and Timo Lappalainen as members of the Committee.
The Audit Committee met five times in 2015 with an attendance rate of 100%.
The Personnel and Remuneration Committee consists of three members out of which the majority must be independent of the Company, elected by the Board of Directors from amongst its members. The Board of Directors has approved a Charter for the Committee, according to which the Committee assists the Board of Directors by preparation of matters related to compensation of Managing Director, his Deputy and the members of the Management Board, by preparation of matters pertaining to the compensation systems and long-term incentive plans of the Company, by preparation of matters relating to appointment of Managing Director, his Deputy and the members of the Management Board. The Committee also monitors succession planning of the senior management and the senior management's performance evaluation. The Committee reports to the Board of Directors on each meeting.
After the 2015 AGM, the Board elected Jari Paasikivi the Chairman and Kerttu Tuomas and Juha Laaksonen the members of the Personnel and Remuneration Committee.
In 2015, the Personnel and Remuneration Committee met three times. The attendance rate at the meetings was 100%.
The Board of Directors appoints the Managing Director and the Managing Director's Deputy. Under the Articles of Association, the Managing Director is responsible for managing and developing the Company in accordance with the instructions and regulations issued by the Board of Directors, ensuring that the Company's interests are served by the subsidiaries and associated companies under its ownership, and puts the decisions taken by the Board of Directors into effect. The Managing Director reports to the Board on financial affairs, the business environment and other significant issues. The Managing Director also functions as the Chairman of Kemira's Management Board.
Kemira Oyj's Managing Director (President and CEO) is Jari Rosendal, and the Deputy Managing Director is Group General Counsel Jukka Hakkila. The Managing Director and the Managing Director's Deputy, including their related parties, are not involved in any substantial business relationships with the Company.
The personal information concerning the Managing Director and the Managing Director's Deputy is set forth under the section Group Management and their holdings can be found in the section Insiders. The financial benefits related to the Managing Director's employment relationship are described in a section Remuneration Report.
Kemira's Management Board consists of Managing Director Jari Rosendal (President and CEO), Kim Poulsen (President, Pulp & Paper and APAC), Tarjei Johansen (President, Oil & Mining and Americas), Antti Salminen (President Municipal & Industrial and EMEA), Petri Castrén (CFO), Heidi Fagerholm (CTO), Eeva Salonen (EVP, HR), Michael Löffelmann (EVP, Projects and Manufacturing Technology) and Esa-Matti Puputti (EVP, Operational Excellence). In addition, the following persons have acted as members of the Management Board during 2015: Petri Helsky (President, Paper and APAC, until March 31, 2015) and Mats Rönnbäck (Interim President, Paper and APAC, April 1 - October 31, 2015).
The Managing Director is the Chairman of the Management Board and the Group General Counsel acts as its Secretary.
The Management Board is responsible for securing the long-term strategic development of the Company.
The personal information of the Management Board members are presented in the section Group Management and their holdings can be found in the section Insiders. The decision-making process and main principles of remuneration of the members of the Management Board are described in section Remuneration Report.
Kemira Oyj has organized its business into three customer based segments. The Pulp & Paper segment focuses on serving customers in the pulp and paper industry, the Oil & Mining segment focuses on serving customers in the oil, gas and mining industries and the Municipal & Industrial segment concentrates on serving customers in municipal and industrial water treatment.
The segments have a strategic leadership role as they formulate their respective business strategies and guide the strategy implementation within the segment.
Operational business responsibilities within a segment are assumed by Regional Business Units (RBUs) having full Profit & Loss responsibility. The RBUs are the key business decision making organs in the Company. As most business decisions are taken on a regional level closer to customers, Kemira is able to respond rapidly to changes in market environment.
The RBUs are guided by policies and guidelines defined by global functions. Global functions are responsible for developing policies, processes, guidelines and tools related to their respective functional areas on a global basis. They oversee that such policies and processes are adopted and implemented throughout the Company.
Functions also have representatives in each region. Regional functions ensure that the global policies are implemented and adhered to in the regions. They are also responsible for supporting the business locally in the region.
Geographically Kemira's operations are divided into three business regions: Europe, Middle East and Africa (EMEA), Americas and Asia Pacific (APAC). The Region Heads provide operational support and co-ordination within the region and steer all regional development projects. They also have regional Profit & Loss responsibility.
Kemira maintains an internal control system to ensure the effectiveness and efficiency of its operations, including the reliability of financial and operational reporting and compliance with the applicable regulations, policies and practices. Internal control is an integral part of all of Kemira's operations and covers all levels of the Group. The entire Group personnel are responsible for internal control and its effectiveness is monitored by managers as part of operative management.
Kemira's corporate values, Code of Conduct and Group level policies and procedures guide the corporate governance and internal control in the Group. The internal policies and the Kemira Code of Conduct have been communicated to all Group staff. The Group also provides training concerning the main policies for people who need to know the policies in question. Every employee has the right and duty
to report any violations of the law, the Code of Conduct or Group policies.
The main components of internal control are the management and organizational culture, risk assessment, control activities, reporting and communication, as well as monitoring and auditing.
As provided by the Finnish Securities Markets Act, Kemira Oyj's insiders consist of insiders subject to disclosure requirements, permanent company-specific insiders and project specific insiders. On the basis of their position, Kemira's insiders subject to disclosure requirements comprise Board members, the Managing Director and the Deputy Managing Director, members of Kemira Oyj's Management Board and the auditor or the chief auditor representing the independent firm of public accountants. Kemira Oyj's permanent company-specific insiders comprise certain other position holders separately specified by the Group General Counsel.
Kemira Oyj complies with the Insider Guidelines issued by the Nasdaq Helsinki Ltd., according to which insiders should trade in Company shares at a time when the marketplace has the fullest possible information on circumstances influencing the value of the Company's share. Accordingly, Kemira Oyj's insiders may not trade in Company shares for 30 days prior to the disclosure of the Company's interim accounts or the release of the financial statements bulletin. In this regard, Kemira has decided to apply a longer period than that required by the Insider Guidelines issued by Nasdaq Helsinki Ltd., according to which the period must be a minimum of 14 days.
Kemira's Legal function maintains Kemira Oyj's insider register and updates information on the Company's insiders subject to statutory disclosure requirements to be entered in the public insider register of Euroclear Finland Oy. Kemira's insider information is available in the webbased service maintained by Euroland Investors.
The table enclosed shows insider shareholdings of all insiders subject to disclosure requirements as of December 31, 2015 and December 31, 2014. Shareholdings include personal shareholdings and the related-party holdings as well as holdings in companies over which the shareholder exercises control. Up-to-date insider information as well as updated shareholding information can be found on the Company's website at www.kemira.com > Investors > Corporate governance > Insiders.
| Insiders' shareholdings | number of shares Dec 31, 2015 |
number of shares Dec 31, 2014 |
|---|---|---|
| Board of Directors | ||
| Büchele Wolfgang | 102,356 | 100,957 |
| Fok Winnie | 6,599 | 5,200 |
| Laaksonen Juha | 9,085 | 7,327 |
| Lappalainen Timo | 2,699 | 1,300 |
| Paasikivi Jari | 211,936 | 209,066 |
| Tuomas Kerttu | 8,775 | 7,017 |
| Management Board | ||
| Castrén Petri | 2,500 | 2,500 |
| Fagerholm Heidi | 0 | 0 |
| Johansen Tarjei | 0 | 0 |
| Löffelmann Michael | 0 | 0 |
| Poulsen Kim | 0 | not an insider |
| Puputti Esa-Matti | 0 | not an insider |
| Rosendal Jari | 10,000 | 10,000 |
| Salminen Antti | 3,000 | 3,000 |
| Salonen Eeva | 26,589 | 26,589 |
| Former members of the Management Board |
||
| Petri Helsky | not an insider | 71,501 |
| Mats Rönnbäck | not an insider | not an insider |
| Managing Director's Deputy | ||
| Hakkila Jukka | 57,856 | 57,856 |
| Auditor | ||
| Vattulainen Jukka | 0 | 0 |
Kemira Group's Internal Audit function provides independent appraisal and assurance for the review of operations within the Group in order to support the management and the Board of Directors in fulfilling their oversight responsibilities. The purpose is to evaluate and contribute to the improvement of risk management, control and governance systems in the Group. The purpose, authority and responsibilities of the unit are defined in the Kemira Internal Audit Charter approved by the Audit Committee. Internal auditors have complete and unrestricted access to all Kemira activities. Internal Audit reports to the Audit Committee and administratively to the Group General Counsel. Internal audit plans and findings are subject to regular review with the external auditors during the course of the year.
Under the Articles of Association, the shareholders' meeting elects an audit firm certified by the Finland Chamber of Commerce as the Company's auditor. The audit firm appoints the Principal Auditor, who is an Authorized Public Accountant certified by the Finland Chamber of
Commerce. The auditor's term of office continues until the next Annual General Meeting after the Auditor's election. The 2015 Annual General Meeting elected Deloitte & Touche Ltd. as the Company's auditor, with Jukka Vattulainen, APA, acting as the Principal Auditor.
In 2015, the audit fee paid globally to the auditor (Deloitte) totaled EUR 1.5 million. In addition, a total of EUR 0.8 million was paid as fees for other services.
MAIN FEATURES OF THE INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS PERTAINING TO THE FINANCIAL REPORTING PROCESS
Kemira's Board of Directors defines the main principles of risk management and approves the Group's risk management policy. The business segments and functions are responsible for identifying, assessing and managing risks involved in their activities. The Group's Risk Management office coordinates and supports risk management.
Kemira's internal control system covers all Group operations, including financial reporting. The internal control activities are carried out in all organizational levels as part of the Group's daily operations.
A more detailed description of risks and risk management can be found in section Risk Management and also on the Company's website at www.kemira.com > Investors > Corporate governance > Risk management. A general description of Kemira's internal control system can be found above under the heading Internal control.
The following describes how Kemira's risk management and internal control work in connection with the financial reporting process to ensure that the financial reports published by the Company give essentially correct information of the Company's financial situation.
Kemira's Board of Directors ensures that the Company has sufficient resources for risk management and control, and that the control has been arranged appropriately and that the financial statements provide correct and sufficient information of the Company. The Board of Directors is assisted by the Audit Committee in these tasks.
The Managing Director handles the Company's everyday management in accordance with instructions and regulations from the Board of Directors. The Managing Director is responsible for the Company accounting being lawful and that assets are managed reliably.
The CFO is responsible for the general control system of financial reporting. The areas of responsibility between financial administration of the Group, the regions and the segments have been defined precisely. Group level financial functions support, monitor, instruct and offer training to the financial organizations of the regions and segments. Group level financial functions are also responsible for the Group's internal financial reporting and support Segment
Controllers in analyzing business processes. Financial organization in the regions is responsible for the functionality of the financial functions' processes and correctness of figures in their region. Controlling in segments operates under the segments' business management and analyzes the business processes.
The Group's IT function has a significant role both in financial reporting and internal control, as reporting and many control measures, such as process monitoring are based on IT solutions.
The Internal Audit function including its tasks and areas of responsibility are described more specifically above under the heading Internal Audit.
The Group's financial administration is responsible for managing risks related to financial reporting. The risks are identified, assessed and managed in connection with the Group's general risk management process and separately as part of financial administration's own operating processes.
The Group's financial administration assesses risks it has recognized related to financial reporting. In its risk analysis, financial administration defines to which function or process risks are related and how the risks would affect the Group's financial reporting if those were to materialize.
The risk assessment is documented and made available to the persons concerned. The Group's financial administration and Risk Management are responsible for risk documentation being up-to-date and that the risks are reassessed regularly in connection with the Group's strategy process.
Kemira follows uniform accounting and reporting principles based on the International Financial Reporting Standards (IFRS) in all its units. Kemira Group policies and Kemira Group Financial Manual define in detail the processes of accounting and financial reporting to be applied in all Group companies. The purpose of the policies and Financial Manual is to ensure the reliability of financial reporting.
The Group has a global Enterprise Resources Planning (ERP) system that ensures fast and reliable access to data. Subsidiaries report their figures from the ERP system to the Group, using a uniform Group reporting system. The financial organizations of the Group, segments and regions check the correctness of the figures in the Group reporting system in accordance with the responsibility areas described above.
Proper control of financial administration, financial reporting and accounting processes is a basic requirement for the reliability of financial reporting. The Group financial administration determines the appropriate control functions, the objectives of each control function and how the effectiveness of the control functions is monitored and checked based on a risk analysis it performs. The control functions are described in the above mentioned risk
documentation and financial administration is responsible for their practical implementation.
Financial reporting control is performed either continuously as part of the transactions of the company's monitoring processes such as purchasing and sales processes, or alternatively monthly or annually as part of the reporting process.
The personnel of Kemira's financial administration regularly arranges internal meetings and trainings for different personnel groups and exchanges information and experiences concerning for instance reporting and monitoring practices in connection with these meetings. The main instructions and regulations concerning financial reporting, internal control and risk management are available to all employees on the Company intranet.
The functionality of internal control, risk management and reporting systems is constantly monitored as part of daily management of the Company. Each segment, function and region is responsible for implementing internal control, its efficiency and reliability of reporting within their area of responsibility. The Group financial administration monitors the functionality and reliability of the financial reporting process at Group level. The financial reporting processes are also monitored by the Internal Audit function.
Further information on the Board of Directors and the Management Board is available on www.kemira.com.
significant shareholders
WINNIE FOK
MANAGING DIRECTOR, DEPUTY MANAGING DIRECTOR AND MEMBERS OF THE MANAGEMENT BOARD DECEMBER 31, 2015
JUKKA HAKKILA b. 1960 LL.M. Group General Counsel Deputy Managing Director Secretary of the Board of Directors and Management Board
PETRI CASTRÉN b. 1962 LL.M., MBA Chief Financial Officer
HEIDI FAGERHOLM b. 1964 D.Sc. (Chem.Eng.) Chief Technology Officer
TARJEI JOHANSEN b. 1971 M. Sc. President, Oil & Mining and Americas
MICHAEL LÖFFELMANN b. 1970 Ph.D. (Eng.). Executive Vice President,Projects and Manufacturing Technology
KIM POULSEN b. 1966 M. Sc. (Econ.) President, Pulp & Paper and APAC
ESA-MATTI PUPUTTI b. 1959 Lic. Tech. (Eng) Executive Vice President, Operational Excellence
ANTTI SALMINEN b. 1971 Ph.D (Eng.) President, Municipal & Industrial and EMEA
EEVA SALONEN b. 1960 M.A. (Edu.) Executive Vice President, Human Resources
Former members of the Management Board in 2015
b. 1966 M.Sc. (Chem. Eng.), M.Sc. (Econ.) President, Paper and APAC until March 31, 2015
b. 1955 Interim President, Pulp & Paper and APAC April 1–October 31, 2015
Effective compliance with and systematic execution of Kemira's risk management policy and principles proactively protect and help Kemira to reach the desired aggregate risk level and ensure the continuity of Kemira's operations.
The key principles of Kemira's risk management are defined in the Kemira Group Risk Management Policy. In the policy, a risk is defined as a potential event or circumstance, which, if it materializes, may affect Kemira's ability to meet its strategic and operational objectives. In addition, Kemira has Group guidelines and other policies in place that specify management objectives, responsibilities and risk limits in greater detail.
Kemira Oyj's risk management is based on the Finnish Corporate Governance Code, the Kemira Code of Conduct and the company's values. The principles of Kemira's risk management are also in compliance with international risk management frameworks and standards such as ISO 31000 (Risk Management – Principles and Guidelines).
In accordance with its risk management process, Kemira aims at systematic and proactive assessment and treatment of risks placed under various risk categories, such as Strategy and planning, Operations and infrastructure, and Governance and ethics. The objective of the risk management is to contribute to ensuring Kemira's longterm strategic development and to achieving Kemira's strategic and operational targets by supporting decision making by taking uncertainty and its effects into account.
Kemira Oyj's Board of Directors defines the key principles applied in risk management. The Audit Committee approves the Group's risk management policy and assists the Board in risk management supervision. The business segments and functions are responsible for the risks involved in their activities and for the related risk management. The Group's Risk Management function is in charge of developing and coordinating risk management process and risk management networks within the Group. Internal Audit is responsible for monitoring and evaluating the effectiveness of Kemira's risk management system.
At Kemira, each business segment, and key functions perform its overall risk management according to the risk management framework and process described in Kemira's Risk Management Policy. Risks are identified, analyzed and evaluated in a consistent manner. Risk management systems and methodologies suitable for the specific risks, situations and organizational needs are applied. The results of the risk management process are reported
regularly both internally and as a part of Kemira Oyj's external reporting.
Some of Kemira's risk treatment measures are performed centrally in order to generate cost benefits and ensure a sufficient level of protection. These include, for instance, hedging of treasury risks, as well as purchase and management of insurance programs to provide cover for liability, cargo, and property and business interruption risks.
As in previous years, risk management was integrated into the strategy process in 2015. Risks were assessed against defined strategic objectives of Kemira. Kemira's key risks from different risk categories are described in the following paragraphs. Despite proactive risk management efforts, some of the risks may possibly materialize and significantly impact on Kemira's ability to achieve its targets.
Significant and rapid decline in the use of certain chemicals (e.g. chemicals for packaging and board production) or in the demand of customers' products or activity could have a negative impact on Kemira's business. Significant decline in oil, gas and metal prices may shift customers' activities in areas which can be exploited with fewer chemicals. Also increased awareness of and concern towards climate change and more sustainable products may change customers' demands, for instance, toward water treatment technologies with lower chemical consumption, and this may have a negative impact on especially Municipal & Industrial segment's ability to compete. On the other hand, customer's possible capacity expansions could increase the chemical consumption and challenge Kemira's current production capacity. Failure from Kemira's side to be prepared to meet and manage these changed expectations could result in loss of market share.
In order to manage and mitigate this risk, Kemira monitors systematically leading indicators and early warning indicators that focus on market development. Kemira has also continued to focus on the sustainability of its business and is further improving the coordination and cooperation between Business Development, R&D and Sales units in order to better understand the future needs and expectations of its customers. Timely capital investments as well as continuous discussions and follow-ups with customers ensure Kemira's ability to respond to possible increase in demands. Kemira's geographic and customer-industry diversity also provides partial protection against the risk of changed customer demands.
Kemira's business is subject to various laws and regulations, which have relevance in development and implementation of Kemira's strategy. Although laws and regulations can generally be considered as an opportunity for Kemira, certain new legislative initiatives supporting, for instance, the use of biodegradable raw materials or biological water treatment, limiting the use of aluminium or phosphates, or relating to recovery or recycling of phosphorus, may also have a negative impact on Kemira's business. Significant changes, for instance in chemical, environmental or transportation laws and regulations may impact on Kemira's profitability through the increase in production and transportation costs. At the same time, such changes may also create new business opportunities for Kemira. Inclusion of new substances into the REACH authorization process may also bring further requirements to Kemira where failure to obtain the relevant authorization could impact Kemira's business.
Kemira continuously follows regulatory developments in order to maintain the awareness of proposed and upcoming changes of those laws and regulations which may have impact for instance on its sales, production and product development needs. Kemira has established an internal process to manage the substances of potential concern and to create management plans for them that consider for example possibilities to replace certain substances if those would be subject to stricter regulation. Regulatory effects are systematically considered in strategic decision making. Kemira takes active role in regulatory discussions whenever justified from the industry or business perspective.
Kemira operates in a rapidly changing and competitive business environment, which represents a considerable risk to meeting its goals. New players seeking a foothold in Kemira's key business segments may use aggressive means as a competitive tool, which could affect Kemira's financial results. Major competitor or customer consolidations could change the market dynamics and possibly change also Kemira's market position.
Kemira is seeking growth in segments that are less familiar and where new competitive situations will prevail. In the long-term, completely new types of technology may considerably change the current competitive situation. This risk is managed both at the Group and segment levels through continuous monitoring of the competition. The company aims at responding to its competition with active management of customer relationships and continuous development of its products and services to further differentiate itself from the competitors.
Uncertainties in the global economic and geopolitical development are considered to include direct or indirect risks, such as a continuation of low-growth period in the global GDP and negative development in Ukraine (incl. continuation and possible extension of international sanctions against Russia), which could both have unfavorable impacts on the demand for Kemira's products. Certain political actions or changes especially in countries which are important to Kemira, could cause business interference or other adverse consequences. Weak economic development may result in customer closures or consolidations diminishing customer base. Also, the liquidity of Kemira's customers could become weaker, resulting in increased credit losses for Kemira. Unfavorable market conditions may also increase the availability and price risk of certain raw materials. Kemira's geographical and customerindustry diversity provides only partial protection against this risk. Kemira continuously monitors geopolitical movements and changes, and aims to adjust its business accordingly, if reasonable.
Kemira's production activities involve many hazard risks, such as fires and explosions, machinery breakdowns, natural catastrophes, environmental incidents and possible resulting liabilities, as well as employee health and safety risks. These risk events could derive from several factors, including but not limited to unauthorized IT system access by malicious intruder causing possible damage to the systems and consequent financial losses. Systematic focus on achieving set targets, certified management systems, efficient hazard prevention programs, and competent personnel play a central role in managing these hazard risks. In addition, Kemira has several insurance programs that protect the company against financial impacts of hazard risks.
Kemira's Research and Development is a critical enabler for organic growth and further differentiation. New product launches contribute both to the efficiency and sustainability of Kemira's or its' customers' processes as well as to the improved profitability. Both Kemira's future market position and profitability depend on its ability to understand and meet current and future customer needs and market trends and its ability to innovate new differentiated products and applications. Failure to innovate or focus on new disruptive technologies and products may result in non-achievement of growth and profitability targets.
Innovation and R&D related risks are being managed through efficient R&D portfolio management in close
collaboration between R&D and business segments. Kemira has further improved the coordination and cooperation between Business Development, R&D and Sales units in order to better understand the future needs and expectations of its customers. Kemira maintains increased focus towards the development of more differentiated and sustainable products and processes and is also continuously monitoring sales of its new products and applications (launched to the market within the last 5 years).
Acquisitions can be considered as an important driver in accomplishment of corporate goals and strategies. Consolidations are driven by, for instance, chemical manufacturers' interests in realizing synergies and establishing footholds in new markets.
Kemira's market position may deteriorate if it is unable to find and take advantage of future acquisition opportunities. Inorganic growth through acquisitions also involves risks, such as the ability to integrate acquired operations and personnel successfully. If realized, this risk may result in a shortage in the set financial targets for such acquisitions.
Kemira has Group level dedicated resources to actively manage merger and acquisition activities. In addition, external advisory services are being used to screen potential mergers and acquisitions and help execute transactions and post-merger integration. Kemira has also developed its M&A procedures to better support and improve the execution of its business transactions in the future.
Continuous improvement of profitability is a crucial part of Kemira's strategy. Significant and sudden increase in raw material, commodity or logistic costs could place Kemira's profitability targets at risk if Kemira is not able to pass on such increase to product prices without delay. For instance, remarkable changes in oil and electricity prices could materially impact Kemira's profitability.
Changes in the raw material supplier field, such as consolidation or decreasing capacity, may increase raw material prices. Also, material demand changes in industries that are the main users of certain raw materials may lead to significant raw material price fluctuations. Poor availability of certain raw materials may affect Kemira's production if Kemira fails to prepare for this by mapping out alternative suppliers or opportunities for process changes. Raw material and commodity risks can be effectively monitored and managed with Kemira's centralized Sourcing unit. Risk management measures include, for instance, forward-looking forecasting of key raw materials and commodities, synchronization of raw material purchase agreements and sales agreements, strategic investment in energy-generating companies, and hedging a portion of the energy and electricity spend.
The continuity of Kemira's business operations is dependent on accurate and a good-quality supply of products and services. Kemira has currently numerous partnerships and other agreements in place with third-party product and service suppliers to secure its business continuity. Certain products used as raw materials are considered critical as the purchase can be made economically only from a sole or single source. In the event of a sudden and significant loss or interruption of such raw material supply, Kemira's operations could be impacted, and this could have further effects on Kemira's ability to accomplish its profitability targets. Ineffective procurement planning, supply source selection, and contract administration, as well as inadequate supplier relationship management, create a risk of Kemira not being able to fulfill its promises to customers.
Kemira continuously aims to identify, analyze, and engage third-party suppliers in a way that ensures security of supply and competitive pricing of the end products and services. Collaborative relationships with key suppliers are being developed in order to uncover and realize new value and reduce risk. Supplier performance is also regularly monitored as a part of the supplier performance management process.
To secure competitiveness and growth, as well as to improve operative efficiency, it is essential to attract and retain personnel with the right skills and competences. Kemira is continuously identifying high potentials and key competencies for the future needs. By systematical development and improvement of compensation schemes, learning programs, and career development programs, Kemira aims to ensure the continuity of skilled personnel also in the future.
More detailed information on financial risks and their management is provided in the Financial Statements, in section Management of financial risks.
The Annual General Meeting decides the remuneration of the Board of Directors for one term of office at a time. According to the decisions of the Annual General Meeting 2015, the members of the Board of Directors are paid an annual fee and a fee per meeting.
The annual fees are as follows:
A fee payable for each meeting of the Board and its committees are as follows:
The meeting fees are to be paid in cash.
Travel expenses are reimbursed according to Kemira's travel policy.
In addition, the Annual General Meeting decided that the annual fee shall be paid as a combination of the company's shares and cash in such a manner that 40% of the annual fee is paid with the Kemira shares owned by the company or, if this is not possible, Kemira shares acquired from the securities market, and 60% is paid in cash. The shares will be transferred to the members of the Board of Directors within two weeks after the release of Kemira's interim report January 1–March 31, 2015.
The following amounts of shares were paid on April 29, 2015 as part of the annual fee decided by the Annual General Meeting 2015:
There are no special terms or conditions associated with owning these shares.
The members of the Board of Directors are not eligible for any cash bonus plans, share-based incentive plans or supplementary pension plans of Kemira Oyj.
| The remuneration of the Board of Directors |
2015 (EUR) |
2014 (EUR) |
|---|---|---|
| Jari Paasikivi, Chairman | 92,107 | 86,733 |
| Kerttu Tuomas, Vice Chairman | 58,899 | 54,916 |
| Wolfgang Büchele | 53,160 | 43,573 |
| Winnie Fok | 69,960 | 66,973 |
| Juha Laaksonen | 61,299 | 57,916 |
| Timo Lappalainen | 48,960 | 42,973 |
| Jukka Viinanen (Chairman until March 24, 2014) |
- | 2,400 |
| Total | 384,385 | 355,484 |
Remuneration of the Managing Director (President & CEO), his Deputy and the other members of the Management Board comprises a monthly salary, benefits and performance-based incentives. The performance-based incentives consist of an annual cash bonus plan and a long-term Performance Share Plan. The main principles of the performance-based incentive plans are described below under the section Decision-making process and main principles of remuneration.
Members of Kemira Management Board who are employed by a Finnish Kemira company do not have any supplementary pension arrangements in addition to the statutory pensions. Members of Kemira Management Board who are employed by a foreign Kemira company participate in pension systems based on statutory pension arrangements and market practices in their local countries. The Kemira policy is that all new supplementary pension arrangements are defined contribution plans.
Annual base salary is EUR 567,000 per year, including a car benefit and a mobile phone benefit.
Based on terms approved by the Board of Directors. The maximum bonus is 60 percent of the annual salary.
Based on the terms of the Performance Share Plan. The maximum reward is determined as a number of shares and a cash portion to cover taxes and the tax-related costs arising from the reward.
Finnish Employees' Pension Act (TyEL), which provides pension security based on years of service and earnings as stipulated by the law. The retirement age of the Managing Director is 63. No supplementary pension arrangements in addition to the statutory pensions.
A mutual termination notice period of six months applies to the Managing Director. The Managing Director is entitled to an additional severance pay of 12 months' salary in case the company terminates his service.
In 2015, the total remuneration paid to Managing Director Jari Rosendal amounted to EUR 669,765 (EUR 360,000), including base salary, benefits and a performance based cash bonus of EUR 109,965. No share-based incentive was paid to Jari Rosendal in 2015.
| Salary and benefits (EUR) |
Performance based annual bonus plan (EUR) |
Performance based share plan (EUR) |
Total 2015 (EUR) |
Total 2014 (EUR) |
|
|---|---|---|---|---|---|
| Managing Director Jari Rosendal | 559,800 | 109,965 | - | 669,765 | 360,000 |
| Other members of the Management Board | 2,006,704 | 513,029 | - | 2,519,733 | 3,893,458 |
The Board of Directors decides the salaries, other remuneration and the terms of employment of the Managing Director, the Deputy Managing Director and the other members of the Management Board. The Personnel and Remuneration Committee of the Board assists the Board of Directors by preparation of matters related to remuneration of the Managing Director, his Deputy and the members of the Management Board and by preparation of matters pertaining to the compensation systems and long-term incentive plans of the company.
The cash bonus is determined based on the achievement of the Kemira Group level and personal level performance targets set by the Board of Directors for each financial year. The maximum bonus for the Managing Director is 60% of the annual gross salary, for the Managing Director's Deputy 50% and for the other members of the Management Board 50–70% of the annual gross salary. In 2015, as regards the Kemira Group level performance target, the cash bonus was determined on the basis of the intrinsic value, gross margin and the cash flow of Kemira Group.
On December 15, 2014 the Board of Directors of Kemira Oyj decided to establish a long-term share-based incentive plan (the "Performance Share Plan") directed to a group of key employees in Kemira. The aim of the plan is to combine the objectives of the shareholders and the persons participating in the plan in order to increase the value of Kemira, to commit the participants to Kemira, and to offer them a competitive reward plan based on earning Kemira's shares. This plan replaces the share-based incentive plan targeted to the strategic management 2012–2014 as well
as the share-based incentive plan targeted to the key personnel.
The Performance Share Plan includes three performance periods: calendar years 2015, 2016 and 2017. The Board of Directors of Kemira decide on the plan's performance criteria and on the required performance levels for each criterion at the beginning of each performance period. The potential reward of the plan from the performance period 2015 was based on the Kemira Group's revenue and on the Group's operative EBITDA margin.
The potential reward from the performance period 2015 will be paid partly in Kemira's shares and partly in cash in 2016. The cash proportion covers the taxes and tax-related costs arising from the reward to the participant. As a rule, no reward will be paid, if a participant's employment or service ends before the reward payment. The shares paid as reward may not be transferred during the restriction period, which will end two years from the end of the performance period. Should a participant's employment or service end during the restriction period, as a rule, he or she must gratuitously return the shares given as reward.
The Performance Share Plan is directed to approximately 90 people. The rewards to be paid on the basis of the 2016 earning period of the Performance Share Plan correspond to the value of an approximate maximum total of 489,000 Kemira Oyj shares and additionally the cash proportion intended to cover taxes and tax-related costs.
The Board of Directors recommends that a member of the Management Board will own such number of Kemira's shares that the total value of his or her shareholding corresponds to the value of his or her annual gross salary as long as the membership continues. If this recommendation is not yet fulfilled, the Board of Directors recommends that a member of the Management Board will hold 50 per cent of the net number of shares given on the basis of this plan also after the end of the restriction period, as long as his or her shareholding in total corresponds to the value of his or her annual gross salary.
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