According to the Articles of Association, the term of office of a 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 consists of a minimum of five (5) and a maximum of eight (8) members. All Board members are elected by the General Meeting. No special procedures are in place for the nomination or election of Board members by the General Meeting. Instead, the number of Board members is resolved and the members are elected by the General Meeting by majority vote based on shareholders' proposals. The Board elects the Chair and the Deputy Chair from among its members for the whole term of the Board.
Preparation of the Proposal for the Composition of the Board of Directors
The procedure applied by Kesko in the preparation of the proposal for the composition of the Board of Directors is that major shareholders prepare the proposal concerning the Board of Directors, including the proposal for the number of Board members, their fees and, as necessary, the proposal for Board members, to the General Meeting. Kesko's Board of Directors has not established a nomination committee, nor has the General Meeting established a shareholders' nomination board. The major shareholders' proposal referred to above is published in a stock exchange release and included in the notice of General Meeting, provided that the proposal has been submitted to the Company sufficiently in advance to be included in the notice.
The Annual General Meetings held on 13 April 2015 and 4 April 2016 resolved that the number of Board members is seven (7) and the General Meeting held on 13 April 2015 elected seven (7) members.
Kaarina Ståhlberg and Tomi Korpisaari resigned from the Board of Directors elected by the Annual General Meeting held on 13 April 2015 as of 1 March 2016. The General Meeting held on 4 April 2016 elected retailer, trade technician Matti Naumanen and Managing Director, Master of Science in Economics Jannica Fagerholm to replace them until the close of the Annual General Meeting to be held in 2018.
The composition of the Board of Directors is as follows as of 4 April 2016:
In accordance with the Articles of Association, the term of each Board member will expire at the close of the 2018 Annual General Meeting.
Board members’ independence
All of Kesko's Board members are non-executive directors. The Board evaluates the independence of its members on a regular basis in accordance with Recommendation 10 of the Corporate Governance Code (in force since 1 January 2016). Based on its latest independence evaluation on 26 April 2016, the Board considers its members, except for Toni Pokela, to be independent of the Company's significant shareholders and their majority also to be independent of the Company. Pokela is the Chair of the Board of the Company's significant shareholder, the K-Retailers' Association. A Board member is obliged to provide the Board with necessary information for the evaluation of independence.
* Each of the companies controlled by Kiiskinen, Naumanen and Pokela has a chain agreement with Kesko.
** Pokela is the Chair of the Board of a significant company shareholder, the K-Retailers' Association.
Kesko's Board of Directors is responsible for the proper organization 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:
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 2016, the Board held 13 meetings. The Board members' attendance rate at the Board meetings was 98.9%. In 2016, the Board of Directors monitored the implementation of the new strategy approved for Kesko Group in the spring of 2015, it further clarified and concretised the chosen strategic policy definitions and made decisions on the mergers to simplify the Group’s legal structure. The Board of Directors confirmed the achievement of the approved cost savings targets that had been set for the purpose of improving profitability and ensuring competitiveness. The Board also made decisions on significant business arrangements in line with the Group’s confirmed strategy, namely the acquisitions of Onninen Oy and Oy AutoCarrera Ab, as well as the disposals of the Russian food trade and the boat business. In addition, the Board of Directors approved the Board’s diversity policy and made a decision on the approval of the K Code of Conduct guidelines adopted for the Group. 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, the half year financial report and the financial statements prior to their disclosure.
The Board meetings regularly include a review of major topical issues presented by the President and CEO, as well as the reports by the Chairs of the Board's Audit Committee and Remuneration Committee on the preparatory 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.
The Board regularly assesses its operations and working practices and carries out a related self-assessment once a year. Most recently, the Board made a self-assessment in December 2015. The self-assessment was based on a survey followed by the Board’s discussion on the results of the self-assessment and follow-up measures. When assessing its operations, the Board considered that there is a good and confidential working atmosphere among the Board members and that the Board had been more successful than before in allocating their time to addressing matters that are significant to Kesko Group.
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.