Corporate governance statement
Martela Corporation is a Finnish limited liability company that is governed in its decision-making and management by Finnish legislation, especially the Limited Liability Companies Act, by other regulations concerning public listed companies, and by its Articles of Association.
The company complies with the NASDAQ OMX guidelines for insiders and the Finnish Corporate Governance Code 2016 published by the Securities Market Association. Martela comply with all Code’s guidelines.
The Group is managed according to both its operational organisation and legal Group organisation. The Group’s management is based primarily on an operational matrix organisation.
In 2016 sales operations and customer service were organised by business segment as follows:
• Business Unit Finland and Sweden
• Business Unit International
From the beginning of 2017 the Group’s figures will be reported as one business segment.
Martela has an extensive sales and service network which covers the whole of Finland. At the end of 2016 Swedish and Norwegian customer services moved from Bodafors to Nässjö. In Sweden, the unit has its own sales and showroom facilities in Stockholm. In Norway, the unit has its own sales and showroom
facilities in Oslo.
The assembly work earlier carried out at Bodafors has been concentrated at our Nummela production unit and the distribution to our logistics partner. The production and purchasing unit in Poland will continue its operations.
Changes were made to the company’s organisation in the second half of 2016:
• The business units were replaced with a new Customers and Workplace Services unit, which is responsible for customer relationships,sales and workplace services.
• The Innovation to Market (ITM) unit was set up to take responsibility for the company’s brand and marketing, and the development and management of workplace services and the product portfolio.
• The Customer Supply Management (CSM) unit was being developed further. CSM is responsible for after-sales activities,including Martela’s sourcing, production, removal services, product development, materials flows and logistics as wellas IT functions, quality assurance and test laboratory. The plants have been concentrated at three locations: Nummela (final product assembly) and Kitee (manufacturing of melamine and laminate composites), both in Finland, and Warsaw, Poland (upholstery components).
• The Human Resources unit became the People & Communication unit when administration of human resources,communications and responsibility were combined.
• The Group’s Finance and IR unit is responsible for the Group’s financial planning and reporting, and investor relations and legal matters.
The Board of Directors, elected by the Annual General Meeting each year, is responsible for the management and proper arrangement of the operations of the company in compliance with the Limited Liability Companies Act and the Articles of Association. In accordance with the Articles of Association, the Board of Directors consists of no less than five and no more than nine members. There may be no more than two deputy members. The Board of Directors elects from among its members a Chairman and Vice Chairman to serve until the end of the next Annual General Meeting. More information on the composition of the Board and the background information concerning Board members can be found under Corporate Governance/Board of Directors. The Board has confirmed a Charter defining the duties of the Board, meeting practices, the matters to be dealt with at meetings, the targets set by the Board for its operations, a self-evaluation of these operations, and the Board’s committees.
In accordance with the Charter, the matters dealt with by the Board of Directors include:
• Group, business unit and process strategies
• Group structure
• Financial statements, interim financial statements and interim reports
• Group operating plans, budgets and investments
• business expansion and reduction, acquisitions and divestments
• risk management policy and principles of internal control
• treasury policy
• appointment and discharge of the Managing Director
• composition of the Group Management Team
• management’s bonus and incentive plans
• approval and regular review of the principles and systems of corporate governance
• appointment of committees and their reporting
The Board convened ten times during the financial year. The average attendance of Board members was 98 per cent.
The Board reviews its own activities annually either self-assessment or assessment made by external consultant. In both cases a summary of the evaluations is jointly discussed at a Board meeting.
The Board has evaluated the independence of its members and determined that Kirsi Komi, Eero Leskinen, Heikki Martela, Eero Martela, Pinja Metsäranta,Yrjö Närhinen ja Anni Vepsäläinen are independent of the company. Of the company’s largest shareholders, Kirsi Komi, Eero Leskinen and Yrjö Närhinen are independent members of the Board.
The Board has formed from among its members a Compensation Committee which also has a written Charter. According to the Charter, the key duties of the Compensation Committee include:
• deciding, with authorisation from the Board, the salaries and bonuses of the Managing Director and the Group Management Team
• preparing for the Board the criteria of the incentive plans for key personnel
• processing the appointments of Managing Director and Group Management Team members, deputy arrangements and successor issues
The Board’s Compensation Committee comprises Kirsi Komi, Heikki Martela and Anni Vepsäläinen.
The company has no separate audit committee. The Board of Directors sees to the audit committee duties specified in the Corporate Governance Code. The Board is of the view that its members have the necessary and sufficient information on the company’s operations, and the Board monitors the company’s reporting at each meeting. The Finance Director is present at meetings of the Board of Directors and functions as Board secretary. The chairman of the Board is in direct contact with the Finance Director as necessary. The Chairman of the Board is also regularly in contact with Company’s auditor.
The Board of Directors part to be updated q2/2017.
The General Meeting is the company’s supreme decision-making body. The Annual General Meeting must be held within six months of the end of the financial year. The financial statements, Board of Directors’ report and the auditor’s report are presented at the Annual General Meeting. The Meeting decides on the approval of the financial statements, use of the profit shown on the balance sheet, discharging the members of the Board of Directors and the Managing Director from liability, the fees of the Board members and auditors and the number of members on the Board. The General Meeting also elects the Board of Directors and the auditor. Other matters on the agenda for the General Meeting are mentioned in the notice of meeting.
Martela has two share series (‘K shares’ and ‘A shares’), with each K share entitling its holder to 20 votes at a General Meeting and each A share entitling its holder to one vote. The redeeming of K shares is referred to in the Articles of Association. Private owners of K shares have a valid shareholder agreement that restricts the sale of these shares to other than existing holders of K shares. The company’s total share capital on 31 December 2016 was EUR 7 million.
In January–December 2016, a total of 2,067,817 (765,413) of the company’s A shares were traded on the NASDAQ Helsinki exchange, corresponding to 58.2 per cent (21.6) of the total number of A shares.
The value of trading was EUR 14.0 million (2.4); the share price was EUR 12.84 at the end of the year 2016 and EUR 3.53 at the end of the year 2015. During January–December 2016 the share price was EUR 13.50 at its highest and EUR 3.29 at its lowest. At the end of December, equity per share was EUR 6.13 (5.54).
The Board appoints Martela Corporation’s Managing Director and decides on the terms and conditions of his service relationship, which are defined in a written Managing Director’s service contract. The Managing Director is responsible for the operational management and supervision of the parent company and the Group according to the guidelines set by the Board.
The Board of Directors and the Managing Director appoint the members of the Group Management Team. The Managing Director of Martela Corporation acts as the Chairman of the Group Management Team. The directors responsible for the business areas and the Group’s processes are also represented in the Group Management Team. The Group Management Team drafts and reviews strategies, budgets and investment proposals, monitors the financial situation of the Group and its business areas and processes, and the attainment of operational targets and plans. The Group Management Team meets once a month.
Martela Corporation’s Board of Directors is provided with monthly reports on the financial performance and forecasts of the Group. The reports and forecasts are also presented by the CEO at Board meetings, where they are reviewed.
For the purposes of reviewing the interim and half-year reports and annual financial statements, the Board of Directors receives the financial statement information and analyses in advance.
The Group Management Team meets about once a month to evaluate the financial performance, outlook and risks of the Group.
The auditing of Group companies is carried out in accordance with the valid laws in each country and each company’s articles of association. The principally responsible auditor of the parent company co-ordinates the auditing of the Group’s subsidiaries together with the Group’s Managing Director and Finance Director. The auditors of Martela Corporation and the Group are the authorised public accountants KPMG, with Ari Eskelinen, Authorised Public Accountant, as the principally responsible auditor. All the auditors of the Group’s companies are in the KPMG chain. In 2016, a total of EUR 85,000 (114,000) was paid in fees for the Group’s auditing, while EUR 16,000 (24,000) was paid for other services.
Martela’s Board of Directors has confirmed the principles of risk management. The purpose of risk management is to identify, monitor and manage risks that could pose a threat to business and to the achievement of business objectives. Group management has supreme operational responsibility for risk management policy.
In the Group, risks are analysed and decisions are made to manage these risks as a part of the regular monitoring carried out by the Board and the management teams as described above. Risks are also evaluated when planning and making decisions on significant projects and investments. Risk management is integrated with the strategy process as a separate stage of analysis. There is no separate risk management organisation, but the associated responsibilities are assigned in line with the rest of the business operations and organisation. The company’s Board of Directors has included an annual review of risk management in its schedule of work.
The forming of a separate internal audit function has not been deemed appropriate. The fact that the company does not have an internal audit function has been taken into account in the audit plans of the company’s auditors.
It is estimated that the greatest risk to profit performance is related to the general economic uncertainty and the consequent effects on the overall demand in Martela’s operating environment. Due to the projectbased nature of the sector, forecastingshort-term developments is challenging. The New Business Platform IT reform that will take place in the first half of 2017 may pose operating challenges that may impact business operations in the short term. Risks are being minimised by conducting sufficient testing and ensuringsufficient resources and by implementingstandard features of the systems.
In accordance with Martela’s risk management model, risks are classified and prepared for in different ways. Themanufacture of Martela’s products is largely based on the company performing thefinal assembly and using subcontractors for components. Production is based on customer orders, which means that there is no need for large-scale warehousing. Risks of damage are covered by appropriateinsurance policies providing comprehensive coverage for property, business interruption, supplier interruption loss and loss liability risks. The services of an external insurance broker to manage insurance matters. The services of an external partners are also used in legal matters.
No particular responsibility risks have been observed in Martela’s operations. The responsibility perspectives regarding the supply chain are discussed as part of the operations of the Customer Supply Management unit. Finance risks are discussed in the notes to the financial statements.
The reliability of financial reporting is one of the principal objectives of Martela Corporation’s internal control.
The CEO is responsible for the operational management and supervision of the Group according to the guidelines set by the Board. The CEO heads the Group Management Team, the members of which comprise the directors responsible for the business areas and processes. The Group Management Team drafts and reviews strategies,annual operating plans and investment proposals, monitors the status of the Group and its legal units and processes,and the attainment of targets and plans.The Group Management Team meets once a month.
Martela’s strategy is updated and its targets defined on an annual basis. Strategicplanning forms the basis of all planning at Martela and is carried out on a rolling basis for the forthcoming period of 2 – 3 years.Target setting is an internal control prerequisite because the targets of the companies, business areas, functions and supervisors are derived from Group-level targets. For each business area, specific financial and non-financial targets are set in accordance with the business plan, and their attainment is monitored regularly through comprehensive reporting to executive management, for example.
The CFO has overall responsibility for financial reporting in the Group. Reporting to executive management is carried out separately and independently of business operations.
Controllers and financial managers (controller function) are responsible for Group, company and other financial reporting. At Martela, financial reporting is carried out in compliance with guidelines, laws and regulations in a consistent manner throughout the Group. The reliability of financial reporting depends on the appropriateness and reliability of financial and reporting processes and on the control measures taken to ensure these. In 2016, internal control focused on sales functions and especially the processes concerning the management of inventories.
The CFO is responsible for the maintenance and development of reporting processes and defining and implementing control measures. Control measures include guidelines, matching, management reviews and reporting on deviations. The CFO monitors compliance with defined processes and controls. She also monitors the reliability official reporting.
The Board of Directors approves Martela’s strategy and annual operating plans. It also approves the principles and rules of risk management, and monitors on a regular basis the effectiveness and sufficiency of internal control and risk management. Furthermore, the Board is responsible for the internal control of the financial reporting process.
Auditors and other external controllers assess the control measures in terms of the reliability of financial reporting.
The fees paid to the Chairman and to the members of the Board in 2016 totalled EUR 24,000 and EUR 108,000, respectively. However, no fees are paid to Board members employed by the company.
Martela Corporation gained a new CEO on 1 October 2015. The total salaries and other benefits paid to Martela Corporation’s CEOs in 2016 were EUR 232,000 (309,000). In addition, a total of EUR149,000 in share bonuses for the CEO was entered as a reserve in the financial statements in 2016.
Martela’s previous CEO Heikki Martela retired when he reached the age of 60 in spring 2016. For the current CEO, the period of notice of termination of contract is six months for both the CEO and the company. If the company gives notice of termination of contract, the CEO is entitled to one-off compensation equivalent to 6 months’ salary.
Bonus and incentive plans based on annual or shorter-term performance are in place in the Group to promote the achievement of short-term objectives. The amount of the incentive is influenced mainly by performance indicators.
The remuneration of the CEO and the Group Management Team consists of a fixed basic salary, annual performance pay and a long-term share-based incentive scheme.
The Renumeration Committee based on authorization by Board of Directors decides on the annual performance pay of the CEO and other key personnel of the Group and the Board of Directors decides the terms and conditions of the long-term share-based incentive plan.
The amount of performance pay for the CEO and the members of the Group Management Team is based not only on personal results but also on the financial performance of the entire Group and the unit. The annual performance pay of the CEO and the Group Management Team may be no more than 30 – 45 per cent of their annual taxable earnings excluding performance pay. The principle of one-overone approval is observed within the Group, which means that all pay-related terms and conditions require approval from the supervisor or manager who appointed the person in question.
At the end of the financial year on 31 December 2016, the Group had two longterm share-based incentive plans. In the older plan the earning period is the calendar years 2014 – 2016 separately and cumulatively and in the newer plan the calendar years 2017 – 2018 cumulatively and the calendar years 2019 – 2020 cumulatively. The maximum total bonus in the older programme is 160,000 Martela Corporation A shares and an amount of cash that will cover taxes and similar charges, estimated at approximately the value of the shares to be paid. The Board of Directors will decide the earning criteria and the goals for each criteria of the newer programme, adopted on 15 December 2016, at the beginning of the earning period. Bonuses paid for the 2017 – 2018 earning period correspond to a maximum total of approximately 100,000 Martela Corporation series A shares and also includes the cash portion. In the earning periods 2014 – 2016 and 2017 – 2018 the target group of the programmes is the members of the Group Management Team. For the 2016 calendar year the targets were met and 41,777 shares will be distributed as bonuses.
See the notes to the financial statements for information on the effect of management remuneration and the share-based incentive plan on the result for the year.
No other compensation is paid on the basis of membership of the Management Team or a subsidiary.
Martela complies with the Guidelines for Insiders issued by Nasdaq Helsinki Ltd. In addition, Martela’s Board of Directors has confirmed specific insider guidelines for the company to complement Nasdaq Helsinki Ltd’s Guidelines for Insiders.
Insider registers and insiders at Martela
Martela keeps its insider lists in the SIRE-system maintained by Euroclear Finland Ltd. Martela’s public insider register was terminated on 2 July 2016 due to the entry into force of the Market Abuse Regulation (EU N:o 596/2014 “MAR”) on 3 July 2016. The public insider register, from 2 July 2016, can be obtained from Martela’s CFO.
The company has defined as permanent insiders persons who work in Martela Group and have access to all inside information concerning Martela due to their position or task. The permanent insider list is non-public.
In addition to the permanent insider list, non-public project-specific insider lists shall be established, if necessary, as defined in Nasdaq Helsinki Ltd’s Guidelines for Insiders. Permanent insiders are not entered into the project-specific insider lists.
The persons discharging managerial responsibilities, other permanent insiders and persons participating in preparing of financial reports of the company must not trade in Martela’s financial instruments prior to the publication of an interim report and financial statement release of the company. The closed period covers 30 days in Martela
Public disclosure of inside information
Martela discloses inside information that directly concerns Martela or its financial instrument as soon as possible, unless the conditions for delay of disclosure of inside information are met. Martela has defined an internal process in order to evaluate and disclose the inside information, and to follow-up on and evaluate the duration and the conditions for the delay. Martela continuously monitors that the conditions for the delay remain and has the ability to publicly disclose the information immediately in case of data leakage.
Transactions conducted by persons discharging managerial responsibilities
In accordance with MAR, Martela has an obligation to disclose transactions conducted by persons discharging managerial responsibilities and persons closely associated with them. Information on disclosed transactions are available on Martela investor web pages, under releases.
The persons discharging managerial responsibilities and persons closely associated with them are obligated to notify a transaction relating to Martela’s financial instruments to Martela and the Finnish Financial Supervisory Authority promptly and at the latest within three (3) working days of the transaction. The notification of the transaction to the administration of Martela shall be made within one (1) working day following the transaction. The obligation to notify transactions applies to all transactions once a total amount of EUR 5,000 is reached within a calendar year.
The persons deemed to discharge managerial responsibilities within Martela are:
- Members of Martela’s Board of Directors and Managing Director; and
- Members of the Management Team of the Martela Group.