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Corporate Governance

Corporate governance

Martela Corporation is a Finnish limited liability company that is governed in its decision-making and man¬agement by Finnish legislation, especially the Finnish 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 Gov¬ernance Code 2016 published by the Securities Market Association. Martela complies with all of the Code’s guidelines.

ORGANISATION

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 2018 The Group was organised in units as:

  • Sales and Marketing (SM), which is responsible for customer relationships, sales, workplace services and marketing.
  • The Innovation to Market (ITM), which is responsible for the company’s brand and the devel-opment and management of the product portfolio.
  • The Customer Supply Management (CSM), which is responsible for after-sales activities, including sourcing, production, removal services, product development, quality assurance, the research laboratory, planning of material flows and logistics.
  • The plants have been concentrated at three locations: Nummela (final product assembly) and Kitee (manufac¬turing of melamine and laminate composites), both in Finland, and Warsaw (upholstery components), Poland.
  • People & Communication, which is responsible for human resources, communications, responsibility and environmental management.
  • The Group’s Finance, IT and IR, which is responsible for the Group’s financial planning and reporting, investor relations as well as IT and legal matters.
BOARD OF DIRECTORS

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.

Preparations concerning the composition of the Board of Directors are carried out by the principal share¬holders, who propose Board candidates to the Annual General Meeting based on their preparatory work. 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.

According to the principles of the Board diversity, the members of the Board of Directors must have sufficient and complementary experience and expertise in Martela’s most important business sectors and markets. The Board must have both sexes and a diverse age distribution. Board members should have sufficiently diverse professional and educational background, strategy development and implementation skills, economic exper¬tise, experience in managing companies at various stages of development, innovation, decision-making and questioning skills, and sufficient time for working in the board. The achievement and development of diversity in reaching the goals is assessed in the Board Self-Evaluation Discussion.

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 addition to the duties mentioned in the Limited Liability Companies Act and the Articles of Association, the Board of Directors is responsible for:

  • deciding on the Group strategy,
  • deciding on the Group structure,
  • approving financial statements, interim financial statements and interim reports,
  • approving the Group’s operating plans, budgets, major investments and donations,
  • deciding on business expansion and reduction, acquisitions and divestments,
  • deciding on the Risk management policy and principles of the internal control,
  • deciding on dividend policy and make a proposal to the Annual General Meeting on the amount of dividend to be paid,
  • deciding on the Treasury policy,
  • approving and dismissing the CEO and to decide on his salary,
  • authorising the Remuneration Committee to decide on the appointments and remuneration of the members of the Group Management Team and the general principles of the Group’s performance bonus scheme,
  • deciding on Management’s share-based incentive schemes,
  • regularly approving and revising corporate governance principles and internal policies,
  • annually approving the company’s internal control and risk management principles and addressing the most significant risks and uncertainties associated with the company’s operations,
  • appointing board committees and deciding on their reporting,
  • accepting stock exchange releases related to the Board’s decisions,
  • confirming the principles of the Board diversity,
  • the other statutory provisions of the Limited Liability Companies Act, the Corporate Governance Code or elsewhere.

The Board convened eight times during the financial year. The average attendance of the Board members was 100 per cent.

The Board reviews its own activities annually, either by self-assessment or assessment made by an 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, Eero Martela, Katarina Mellström and Anni Vepsäläinen are independent of the company. Of the company’s largest share¬holders, Kirsi Komi, Eero Leskinen, Katarina Mellström and Anni Vepsäläinen are independent members of the Board.

The Board has formed from among its members a Human Resource and Rewarding Committee and an Audit Committee, which both have written Charters.

According to the Charter, the key duties of the Human Resource and Rewarding Committee include:   

  • deciding, with authorisation from the Board, on the remuneration issues and annual performance bonuses of the CEO and the Group Management Team as well as general principles for the Group’s performance bonus scheme for the entire personnel,
  • preparing for the Board the structure, criteria and target levels of the long-term incentive plans for key per¬sonnel,
  • processing the appointments of the CEO and Group Management Team members, deputy arrangements and successor issues. The Compensation Committee also handles remuneration statements in connection with the financial statements.

The Board’s Human Resource and Rewarding Committee comprises Heikki Martela, Kirsi Komi and Katarina Mellström.

According to the Charter, the key duties of the Audit Committee include:   

  • monitoring the financial reporting and interim report processes,
  • supervising the financial reporting process,
  • monitoring the company’s financial condition,
  • monitoring the adequacy and effectiveness of the company’s internal control and risk management systems,
  • processing the description of the internal control and risk management systems related to the financial re¬porting process included in the Corporate Governance Statement,
  • monitoring the statutory audit of the financial statements and the consolidated financial statements,
  • observing, together with the auditors and the management of the company, the findings of the auditing carried out and the possible difficulties in carrying out the audit,
  • assessing the independence of the auditor or the audit firm, and in particular the provision of ancillary services to the company,
  • evaluating the fees charged on auditing and ancillary services and their criteria,
  • preparing a proposal for a decision on the election of the auditor,
  • assessing the compliance process with laws and regulations and respect for ethical principles in the organ¬isation,
  • conducting reports on the company’s most significant legal and regulatory procedures.

The Board’s Audit Committee comprises Eero Leskinen, Eero Martela and Anni Vepsäläinen.

The secretary of the Board of Directors is a lawyer from the same company from where other legal services are provided to the Group. The Chairman of the Board is in direct contact with the CFO as necessary and regularly with the Company’s auditor.

ANNUAL GENERAL MEETING

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 CEO from liability, the fees of the Board members and auditors and the number of members on the Board. The General Meeting also elects the Directors of the Board and the auditor. Other matters on the agenda of the General Meeting are mentioned in the notice of meeting.

SHARES

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 2018 was EUR 7 million.

CEO

The Board appoints Martela Corporation’s CEO and decides on the terms and conditions of his service rela¬tionship, which are defined in a written CEO’s service contract. The CEO is responsible for the operational man¬agement and supervision of the parent company and the Group according to the guidelines set by the Board.

GROUP MANAGEMENT TEAM

The Board of Directors and the CEO appoint the members of the Group Management Team. The CEO of Martela Corporation acts as the Chairman of the Group Management Team. The directors responsible for the units and processes are also represented in the Group Management Team. The Group Management Team drafts and reviews strategies, budgets and investment proposals and 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.

FINANCIAL REPORTING IN THE GROUP

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.

The Group Management Team meets about once a month to evaluate the financial performance, outlook and risks of the Group.

AUDITING

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 CEO and CFO. The auditors of Martela Corpora¬tion and the Group are the authorised public accountants KPMG, with Ari Eskelinen, Authorised Public Account¬ant, as the principally responsible auditor. All the auditors of the Group’s companies are in the KPMG chain.

RISK MANAGEMENT AND INTERNAL AUDIT

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 eval¬uated 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.

Taking into consideration the nature and scope of Martela’s business, the company has not considered to be appropriate to form of a separate internal audit function. The internal control is carried out in the form of controls in business processes, and the company will either make its own or, if necessary, conduct separate internal audit reports with external experts.

RISKS

In accordance with Martela’s risk management model, risks are classified and prepared for in different ways. The manufacture of Martela’s products is largely based on the company performing the final assembly and using subcontractors for components. Production control is based on orders placed by customers, which means that there is no need for any large-scale warehousing.

Risks of damage are covered by appropriate insurance policies, and these provide comprehensive coverage for property, business interruption, supplier interruption loss and loss liability risks. Martela uses the services of an external insurance broker to manage insurance matters. The services of an external partner are also used in legal matters.

The responsibility perspectives regarding the supply chain are discussed as part of the annual responsibility report.

Finance risks are discussed in the notes to the financial statements.

INTERNAL CONTROL

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.

Martela’s strategy is updated and its targets defined on an annual basis. Strategic planning 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 com¬prehensive 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 2018, the internal control focused on sales, the processes concerning the management of inventories and new IT system.

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 of financial reporting.

The Board of Directors approves Martela’s strategy and annual operating plans. It also approves the prin¬ciples and rules of risk management, and monitors on a regular basis the effectiveness and sufficiency of the 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.

MANAGEMENT REMUNERATION, BENEFITS AND INCENTIVE PLANS

Information on the effect of management remuneration and the share-based incentive plan on the result for the year can be found in the notes of the financial statements and on the company’s website.

INSIDER ADMINISTRATION

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.

Insiders at Martela
The company has defined as permanent insiders persons who work at Martela Group and who have access to all inside information concerning Martela due to their position or task. The information in the permanent in¬sider list is not 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.

Closed period
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 length of the closed period is 30 days at 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 monitor and evaluate the duration and the conditions for the delay. Martela continuously monitors the situation to ensure that the conditions for the delay are met and the company has the ability to publicly disclose the information immediately in the case of a data leakage.

Transactions conducted by persons discharging managerial responsibilities
In accordance with MAR, Martela has an obligation to disclose transactions with Martela’s financial instru¬ments conducted by persons discharging managerial responsibilities at the company and persons closely associated with them.

The obligation to disclose transactions applies to the following persons discharging managerial responsibilities at Martela:

  • Members of Martela’s Board of Directors and CEO,
  • Members of Martela Group’s Management Team.

Transactions between companies in the Martela Group conducted by persons discharging managerial respon¬sibilities at Martela and persons closely associated with them are monitored. In 2018 there were no material related party transactions.
 

Articles of association

Martela's articles of association (in Finnish).