Corporate governance principles



Kesko's compliance with regulations and the Corporate Governance Code

Kesko Corporation (Kesko or the Company) is a Finnish limited liability company in which the duties and responsibilities of the executive bodies are determined in accordance with the laws of Finland. The parent company, Kesko, and its subsidiaries form Kesko Group. The Company is domiciled in Helsinki.

The highest decision-making power in Kesko is exercised by the Company's shareholders at the Company's General Meeting. The Company's shareholders elect the Company's Board of Directors and Auditor at the General Meeting. Kesko Group is managed by the Board of Directors and the Managing Director, who is the President and CEO. The President and CEO is appointed by the Board of Directors. The Company uses a so-called one-tier governance model.

Kesko's decision-making and corporate governance are guided by Kesko's values and the K Code of Conduct guidelines. Decision-making and corporate governance are in compliance with the Finnish Limited Liability Companies Act, the regulations concerning publicly listed companies, Kesko's Articles of Association, the charters of Kesko's Board of Directors and its Committees and the rules and guidelines of Nasdaq Helsinki Ltd. Kesko complies with the new Finnish Corporate Governance Code for listed companies (the Finnish Corporate Governance Code) effective as of 1 January 2020. Kesko will issue its first Remuneration Report for Governing Bodies in accordance with the new Finnish Corporate Governance Code for the financial year beginning on 1 January 2020.  Kesko’s Remuneration Statement 2019 was issued in accordance with the Finnish Corporate Governance Code 2015. The Corporate Governance Codes can be read in full at www.cgfinland.fi/en/corporate-governance-code/

As provided by the comply or explain principle of the Corporate Governance Code, the Company departs from the Corporate Governance Code's recommendation concerning a Board member's term of office and independence of directors as described below.

Departure from a Corporate Governance Code Recommendation

The term of office of Kesko's Board members departs from the one-year term of office pursuant to Recommendation 6 – Term of Office of the Board of Directors – of the Corporate Governance Code. The term of office of the Company's Board of Directors is determined in accordance with the Company's Articles of Association. The General Meeting decides on amendments to the Articles of Association. According to the Company's 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.

A shareholder who, together with related entities, represents over 10% of votes attached to all Kesko shares, has informed the Company's Board of Directors that it considers the term of office of three (3) years good for the Company's long-term development and has not seen any need to shorten the term stated in the Articles of Association.

The independence of Kesko's Board members has departed from Recommendation 10 (Independence of Directors) of the Corporate Governance Code, according to which the majority of the members of the Board of Directors shall be independent of the Company. The Board of Directors updated its independence evaluation on 22 July 2020. Based on the new evaluation, the majority of the members of the Board of Directors are independent of the Company, in line with the Corporate Governance Code recommendation. Board member Piia Karhu is deemed independent of the Company, because as of 1 July 2020 she is no longer employed by Finnair Plc, and the interlocking control relationship that arose when Kesko Group's CFO Jukka Erlund became a member of the Board of Directors of Finnair Plc on 20 March 2019, no longer exists.

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