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Board of Directors

Term of office, composition and independence

Term of office

According to the Articles of Association, the term of office of a Kesko Board member is three (3) years, starting at the close of the General Meeting electing the member and expiring at the close of the third (3rd) Annual General Meeting after the election.

According to the Articles of Association, Kesko's Board of Directors is composed of a minimum of five (5) and a maximum of eight (8) members. All Board members are elected by the General Meeting. There are no special procedures concerning the nomination of Board member candidates or their election at the General Meeting, as the number of Board members is resolved and the members are elected by majority votes at the General Meeting based on shareholders’ proposals. The Board elects the Chair and the Deputy Chair from among its members for the whole term of office of the Board.

Composition

The Annual General Meeting held on 13 April 2015 resolved that the Board of Directors is composed of seven (7) members, and the General Meeting of 13 April 2015 elected seven (7) members to the Board:

Esa Kiiskinen, b. 1963, Business College Graduate
Chair of the Board
Chair of the Remuneration Committee
Food retailer
Member of the Board since 30 March 2009.

Mikael Aro, b. 1965, eMBA
Deputy Chair of the Board
Deputy Chair of the Audit Committee and the Remuneration Committee
President and CEO of VR-Group Ltd
Member of the Board since 13 April 2015.

Tomi Korpisaari, b. 1968, Master of Science (Economics)
Retailer, building and home improvement and agricultural trade
Member of the Board since 16 April 2012.

Matti Kyytsönen, b. 1949, Master of Science (Economics)
Member of the Audit Committee
Chair of the Board of Silverback Consulting Oy
Member of the Board since 13 April 2015.

Anu Nissinen
b. 1963, Master of Science (Economics)
Member of the Remuneration Committee
Chair of the Board of Era Content Oy
Member of the Board since 13 April 2015.

Toni Pokela, b. 1973, Secondary School Graduate
Food retailer
Board member since 16 April 2012.

Kaarina Ståhlberg
b. 1966, Master of Laws (Columbia University)
Chair of the Audit Committee
Lawyer, self-employed person
Member of the Board since 13 April 2015.

In accordance with the Articles of Association, the term of office of each member of the Board of Directors will expire at the close of the 2018 Annual General Meeting.

Until 13 April 2015, the Board of Directors was composed of Esa Kiiskinen, Tomi Korpisaari and Toni Pokela, as well as Seppo Paatelainen (b. 1944, Master of Science (Agriculture and Forestry), Deputy Chair of the Board, Deputy Chair of the Remuneration Committee and the Audit Committee, member of the Board from 27 March 2006 until 13 April 2015), Ilpo Kokkila (b. 1947, Master of Science (Technology), member of the Remuneration Committee, Chair of the Board of SRV Yhtiöt Oyj, member of the Board from 27 March 2006 until 13 April 2015), Maarit Näkyvä (b. 1953, Master of Science (Economics), Chair of the Audit Committee, member of the Board from 1 January 2001 until 13 April 2015) and Virpi Tuunainen (b. 1967, Doctor of Science (Economics and Business Administration), member of the Audit Committee, Professor at the Department of Information and Service Economy at Aalto University and Director of Aalto Service Factory, member of the Board from 16 April 2012 until 13 April 2015. The memberships of Paatelainen, Kokkila, Näkyvä and Tuunainen of the Company’s Board of Directors ended on 13 April 2015.

Independence

All members of Kesko's Board of Directors are non-executive directors. The Board evaluates the independence of its members on a regular basis in accordance with Recommendation 15 of the Corporate Governance Code (Recommendation 10 of the new Corporate Governance Code).

In 2015, the Board of Directors carried out an independence evaluation on 13 April 2015. Based on that independence evaluation, the Board of Directors considers all its members to be independent of the Company's significant shareholders, and the majority of the members also independent of the Company. A Board member is obliged to provide the Board with necessary information for the evaluation of independence.

The total voting rights in respect of shares in Kesko held by K-Retailers' Association, a significant Company shareholder, exceeded 10% on 23 December 2015. In consequence, Tomi Korpisaari was considered by the Board in its meeting on 11 January 2016 not to be independent of a significant shareholder, because Korpisaari is the Chair of the Board of the K-Retailers’ Association.

Board members’ independence in 2015
Independent of the CompanyIndependent of a significant shareholder
Esa Kiiskinen (Ch.)No***Yes
Mikael Aro (Dep. Ch.)*YesYes
Tomi KorpisaariNo***Yes****
Matti Kyytsönen*YesYes
Anu Nissinen*YesYes
Toni PokelaNo***Yes
Kaarina Ståhlberg*YesYes
Ilpo Kokkila**YesYes
Maarit Näkyvä**YesYes
Seppo Paatelainen (Dep.Ch.)**YesYes
Virpi Tuunainen**YesYes
* As of 13 April 2015
** Until 13 April 2015
*** Each of the companies controlled by Kiiskinen, Korpisaari and Pokela has a chain agreement with a Kesko Group company.
**** In its meeting on 11 January 2016, the Board of Directors considered Tomi Korpisaari not to be independent of a significant shareholder, because he is the Chair of the Board of a significant Company shareholder, the K-Retailers’ Association. The total voting interest of the K-Retailers' Association in the Company exceeded 10% on 23 December 2015.

Main duties

Kesko's Board of Directors is responsible for the proper organisation the Company's administration, operations, accounting and financial management controls. The Board is also responsible for the supervision and control of the whole Kesko Group. The Board of Directors has confirmed a written charter for the Board of Directors’ duties, the matters it deals with, its meeting practice and the decision-making procedure. In accordance with the charter, the Board deals with and makes decisions on matters that are financially, operationally or fundamentally significant to the Group.

According to the charter, the Board of Directors’ main duties include:

  • deciding on the Group strategy and confirming the divisions’ strategies
  • confirming the Group's budget and rolling forecast, which includes a capital expenditure plan
  • adopting the Group's financial and investment policy
  • confirming the Group's risk management policy and considering the Group's most significant risks and uncertainties
  • reviewing and adopting the consolidated financial statements, interim reports and related stock exchange releases and the Report by the Board of Directors
  • deciding on strategically or financially significant individual capital expenditures, business acquisitions, divestments or arrangements, and commitments
  • deciding on management authorisation rules
  • deciding on the essential structure and organisation of the Group
  • appointing and dismissing the Company's President and CEO, approving his/her managing director's service contract and deciding on his/her compensation and other financial benefits
  • deciding on the appointments of the Group Management Board members responsible for lines of business, on their compensation and financial benefits
  • deciding on the principles of Kesko's remuneration schemes and monitoring the implementation of the remuneration schemes
  • making possible proposals to the General Meeting for share or share-based compensation schemes, and making decisions on granting shares or share options under share or share-based compensation schemes, and on the terms and conditions for granting them
  • establishing a dividend policy and being responsible for shareholder value performance
  • confirming the Company's values
  • reviewing the integrated Kesko’s Year report
  • being responsible for the other statutory duties prescribed to the Board of Directors by the Limited Liability Companies' Act or some other, and for duties prescribed by the Finnish Corporate Governance Code for Listed Companies

Decision-making, operation and meetings

The duty of Kesko's Board of Directors is to promote the interests of Kesko and all of its shareholders. The Board members do not represent the parties in the Company that have proposed their election as Board members. A Board member is disqualified from participating in the handling of any matter between him/her (including entities over which he/she exercises control) and the Company. When a vote is taken, the Board's decision will be the opinion of the majority and if a vote results in a tie, the decision will be the opinion supported by the Chair. If the votes taken at an election of a person end in a tie, the result will be decided by drawing lots.

In 2015, the Board held 13 meetings. The Board members' attendance rate at the Board meetings was 100%.

In 2015, the Board of Directors adopted a new strategy for Kesko Group, decided to establish common functions to support the Group’s business operations, to strengthen the competitiveness of business operations through closer internal cooperation, and to start the simplification of the Group’s legal structure. For the purpose of improving profitability and competitiveness, the Board of Directors discussed and approved cost saving targets. In respect of strategic issues related to the Group’s property ownerships and property management, the Board decided to establish a common real estate investment company jointly with two other investors and to sell properties to this company. The Board also decided on significant business arrangements in line with the Group’s confirmed strategy.

As in previous years, the Board reviewed the financial reports and monitored the Group's financial situation, approved the most significant capital expenditures, monitored the progress of Group-level projects and approved the interim reports and the financial statements prior to their disclosure.

The Board meetings regularly discuss the review by the President and CEO on key topical issues, as well as the reports by the Chairs of the Board's Audit Committee and Remuneration Committee on Committee meetings preceding the Board meetings. The Auditor presents his findings to the Board once a year in connection with the review of the financial statements.

Attendance at meetings by members of the Board and its Committees in 2015
Attendance
Board member sinceCommittee membershipBoardAudit CommitteeRemuneration Committee
Esa Kiiskinen (Ch)2009Remuneration Committee (Ch.)13/133/3
Mikael Aro (Dep. Ch.)*2015Audit Committee (Dep. Ch.)10/104/4
Remuneration Committee (Dep. Ch.)1/1
Tomi Korpisaari201213/13
Matti Kyytsönen*2015Audit Committee10/104/4
Anu Nissinen*2015Remuneration Committee10/101/1
Toni Pokela201213/13
Kaarina Ståhlberg*2015Audit Committee (Ch.)10/104/4
Ilpo Kokkila**2006Remuneration Committee3/31/2
Maarit Näkyvä**2001Audit Committee (Ch.)3/31/1
Seppo Paatelainen (Dep. Ch.)**2006Audit Committee (Dep. Ch.)3/31/1
Remuneration Committee (Dep. Ch.)2/2
Virpi Tuunainen**2012Audit Committee3/31/1
* As of 13 April 2015
** Until 13 April 2015

Board’s Committees

Kesko has the Board’s Audit Committee and Remuneration Committee, both of which are composed of three (3) Board members. At the close of the Annual General meeting, the Board elects the Chairs, the Deputy Chairs and the members of the Committees from among its members for one year at a time.

All members of the Audit Committee are independent of the Company and the Company’s significant shareholders. In the election of the Audit Committee members, the competence requirements for Audit Committee members have been taken into account.

All members of the Remuneration Committee are independent of the Company's significant shareholder and its majority is also independent of the Company. In the election of the Remuneration Committee members, the competence requirements for Remuneration Committee members have been taken into account.

The Committees regularly assess their operations and working methods and carry out a related self-assessment once a year. The Board has confirmed written charters for the Committees, which contain the main duties and operating principles of the Committees.

The Committees have no independent decision-making power. Instead, the Board makes decisions based on the Committees’ preparatory work. The Committee Chair reports on the Committee's work at the Board meeting following the Committee's meeting. Minutes of the Committee meetings are submitted for the information of the Board members.

Kesko's Board of Directors has not established any other committees in addition to the Audit and Remuneration Committees. Nor has the General Meeting appointed any committees or boards.

Audit Committee and its operation

The members of the Audit Committee, elected by the Board's organisational meeting held after the Annual General Meeting 2015, are:

  • Kaarina Ståhlberg (Ch.)
  • Mikael Aro (Deputy Ch.)
  • Matti Kyytsönen

According to its charter, the duties of the Audit Committee are:

  • monitoring Kesko Group's financial and funding situation and the process of financial statements reporting
  • supervising the Company's financial reporting process
  • evaluating the efficiency of the Company's internal control, internal audit and risk management systems
  • reviewing the Company’s Corporate Governance Statement
  • approving the operating instructions, annual audit plan, budget and resources of the Company's Internal Audit and reviewing the reports submitted to the Committee
  • monitoring the statutory audit of the financial statements and the consolidated financial statements
  • evaluating the independence of the Company's audit firm
  • evaluating the non-audit services provided to Kesko by the audit firm and the audit companies belonging to the same chain
  • preparing a proposal to the General Meeting for a resolution on the election of the Company's Auditor and communicating with the Company's Auditor

In 2015, the Audit Committee held five (5) meetings, and the members' attendance rate at the meetings was 100%. At the Committee meetings, the Group's Chief Financial Officer, the Group Controller, the Chief Audit Executive and the Group General Counsel regularly report on their areas of responsibility to the Committee. The Committee also receives reports on Kesko Group's funding situation, taxation, information management, risk management and insurances. The Auditor is present at the Committee meetings and presents his audit plan and report to the Audit Committee.

During the year, the Committee reviewed the reports on the Group's financial situation, including the financial statements release and interim reports and made a recommendation to the Board on the review of the interim reports and the financial statements release. In addition, the Committee reviewed the reports of the Group's external and internal audits, risk management and legal affairs, and the Group’s adoption of integrated reporting, the impacts of the pension reform on the Group’s reporting, the impacts and risks of the strategic business arrangements, the simplification of the Group structure, as well as the changes required by the revised Corporate Governance Code. The Committee also assessed the Auditor's independence and provision of consultation services to the Group. The Audit Committee prepared and submitted a proposal to Kesko’s Annual General Meeting 2015 for the election of the Auditor based on the competitive bidding process for Auditors conducted towards the end of 2014.

Remuneration Committee and its operation

The members of the Remuneration Committee, elected by the Board's organisational meeting held after the Annual General Meeting 2015, are:

  • Esa Kiiskinen (Ch.)
  • Mikael Aro (Deputy Ch.)
  • Anu Nissinen

According to its charter, the duties of the Remuneration Committee are:

  • preparing matters pertaining to the compensation and other financial benefits and the managing director's service contract of the President and CEO to the Board
  • preparing matters pertaining to the compensation and other financial benefits of the Group Management Board members responsible for lines of business; decisions on the compensation and other financial benefits of the Group Management Board members other than those responsible for lines of business are made by the President and CEO within the limits set by the Chair of the Remuneration Committee
  • preparing matters pertaining to the appointment of the President and CEO and the Group Management Board members responsible for lines of business, and identification of their successors
  • developing remuneration schemes and preparing them to the Company's Board of Directors, including:
  • evaluating the remuneration of the President and CEO and the other executives, and ensuring the appropriateness of the remuneration schemes
  • preparing possible share or share-based remuneration schemes
  • preparing the granting of shares or share options under the share or share-based remuneration schemes, and preparing their terms and conditions
  • reviewing the remuneration statement in connection with the financial statements
  • answering questions concerning the remuneration statement at the General Meeting. Questions are primarily answered by the Committee Chair
  • preparing the principles for the performance and result criteria of the remuneration schemes, and monitoring their implementation and evaluating their impact on Kesko's long-term financial success

In 2015, the Remuneration Committee held three (3) meetings and the members' attendance rate at the meetings was 88.9%. The Committee prepared, among other things, proposals to the Board for the vesting criteria and the target group of share awards and for the principles of management's performance bonuses. In addition, the Committee discussed, among other things, the remuneration schemes of management and personnel and the development of the schemes, as well as the impacts of the pension reform and possible needs for change at Kesko Pension Fund arising from it.

President and CEO

Kesko has a managing director who is the President and CEO. Kesko’s President and CEO is Mikko Helander, Master of Science in Technology. He became Kesko’s President and CEO on 1 January 2015. Helander was a member of the Group Management Board and Kesko’s Executive Vice President from 1 October 2014 until 31 December 2014, and he has been the Chair of the Group Management Board since 1 January 2015.

The President and CEO's duty is to manage Kesko Group’s operations in accordance with the instructions and orders issued by the Company’s Board of Directors and to report to the Board about the developments in the Company's business operations and financial situation. He is also responsible for the Company's day-to-day administration and for ensuring that the financial management has been organised in a reliable manner. The President and CEO also chairs the Group Management Board and the subsidiary Boards essential with regard to business operations.

The President and CEO is elected by the Board of Directors. The Board has decided the terms and conditions of the President and CEO's service contract. A written managing director's service contract, approved by the Board, has been made between the Company and the President and CEO.

Group Management Board

Kesko Group has a Group Management Board, the Chair of which is Kesko's President and CEO.

The Group Management Board does not have any powers under law or the Articles of Association. The Group Management Board’s duty is to discuss Group-wide development projects and Group-level policies and procedures. In addition, the Group Management Board discusses the Group's and the division parent companies' business plans, profit performance and matters dealt with by Kesko's Board of Directors, in whose preparation it also participates. The Group Management Board meets 18–20 times a year.

Group Management Board’s members and their areas of responsibility as at 31 Dec. 2015
Group Management Board member sinceArea of responsibility
Mikko Helander, Chair1 Oct. 2014Kesko's President and CEO
Jorma Rauhala, President of Kesko Food Ltd5 Feb. 2013Grocery trade
Terho Kalliokoski, President of Rautakesko Ltd17 Mar. 2005Home improvement and speciality goods trade
Pekka Lahti, President of VV-Auto Group Oy1 Mar. 2005Car trade
Jukka Erlund, Senior Vice President, Chief Financial Officer1 Nov. 2011Finance and accounting
Matti Mettälä, Senior Vice President1 Oct. 2012Human resources
Anne Leppälä-Nilsson, Senior Vice President, Group General Counsel1 Jan. 2015Legal affairs
Lauri Peltola, Senior Vice President2 Mar. 2015Corporate responsibility,
communications and stakeholder relations
Anni Ronkainen, Senior Vice President20 Apr. 2015Chief Digital Officer

Insider administration

Kesko's insider regulations

Kesko complies with the insider rules of Nasdaq Helsinki Ltd. Kesko's Board of Directors has confirmed Kesko's insider guidelines for permanent and project-specific insiders. The contents of the guidelines correspond to the insider rules of Nasdaq Helsinki. Kesko's insider guidelines have been distributed to all insiders.

Kesko's permanent insiders and insider registers

In accordance with the Securities Markets Act, Kesko's permanent public insiders include Kesko's Board members, the President and CEO (managing director), and the audit firm's auditor with principal responsibility for Kesko. Kesko Corporation's Board of Directors has also defined that, in addition to the President and CEO, the other members of the Group Management Board belong to the Company's permanent public insiders. The permanent public insiders and the statutory information about them, about their related parties and about the corporations that are controlled by them, or in which they exercise influence, have been recorded in Kesko's register of public insiders.

Other permanent insiders of Kesko include persons working at any given time in positions defined by the Board of Directors and having access to insider information and who are therefore recorded in the Company's company-specific, non-public insider register. Kesko's company-specific insider register is divided into project registers concerning permanent insiders and possible insider projects and persons participating in their preparation.

The Group's legal affairs function supervises compliance with insider guidelines and maintains the Company's insider registers in cooperation with Euroclear Finland Ltd. At regular intervals, the legal affairs function sends an extract of the information in the insider register to permanent public insiders for checking and reminds permanent insiders about upcoming trading restrictions preceding the publication of financial results and monitors compliance with them and with trading restrictions during possible insider projects. 

In 2015, Kesko's permanent insiders were not allowed to acquire or transfer securities issued by the Company and securities or derivative contracts entitling to them during the 21 days preceding the publication of an interim report, and during the 28 days preceding the publication of the financial statements (trading restriction). These publication dates are annually announced in advance in a stock exchange release. It has also been requested that permanent insiders' spouses refrain from trading in Kesko securities or derivative contracts during these trading restriction periods. Furthermore, people involved in possible insider projects, whether included in the insider register or not, are not allowed to trade in Kesko's securities or derivative contracts during an insider project.

As of the beginning of 2016, the duration of permanent insiders’ trading restriction prior to result publications is 30 calendar days.

The legal affairs function annually organises training on insider issues and related matters concerning the disclosure obligation of a listed company within the Group.