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 Chairman and the Deputy Chairman 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 Meeting held on 11 April 2018 resolved that the number of Board members is seven (7) and elected seven (7) members to the Board of Directors.
The composition of the Board of Directors is as follows as of 11 April 2018:
Esa Kiiskinen (retailer, Business College Graduate), Chairman
Peter Fagernäs (Master of Laws), Deputy Chairman
Matti Naumanen (retailer, trade technician)
Piia Karhu (Doctor of Science, Economics and Business Administration)
Matti Kyytsönen (M.Sc. Econ.)
Toni Pokela (retailer, eMBA)
In accordance with the Articles of Association, the term of each Board member will expire at the close of the 2021 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 11 April 2018, 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 Chairman of the Board of the Company's significant shareholder, K-Retailers' Association. A Board member is obliged to provide the Board with necessary information for the evaluation of independence.
* Companies controlled by Kiiskinen, Naumanen and Pokela each have a chain agreement with Kesko Corporation.
** Pokela is the Chairman of the Board of Kesko's significant shareholder, the K-retailers' Association
Kesko's Board of Directors is responsible for the proper organisation of the Company's corporate governance, operations, accounting and financial management controls. It 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 its 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 2017, the Board held 10 meetings. The Board members' attendance rate at the Board meetings was 100%. The Board meetings regularly discuss the review by the President and CEO on key topical issues, as well as the reports by the Chairmen of the Board's Audit Committee and Remuneration Committee on Committee meetings preceding the Board meetings. The Auditor presents their findings to the Board once a year in connection with the review of the financial statements. As in previous years, in 2017, the Board reviewed the financial reports and monitored the Group's financial situation, approved the most significant capital expenditure and divestments and new financing arrangements, monitored the progress of Group-level projects and approved the interim reports, the half year financial report and the financial statements before they were published.
In 2017, the Board monitored the implementation of the new Kesko Group strategy approved in the spring of 2015, further clarified and concretised the chosen strategic policy definitions and made decisions on corporate arrangements in line with the approved strategy, such as the divestments of Indoor Group Ltd, minority holdings in the Baltic machinery trade subsidiaries, and the K-maatalous business. The Board monitored the financial performance of previously made acquisitions and their integration into Kesko Group. In order to improve profitability and ensure competitiveness, the Board has made sure that the planned cost saving targets are met. Moreover, the Board, for example, reviewed Kesko’s Annual Report, the results of the K Voices personnel survey, and goodwill impairment testing; decided on the establishment of a new share-based compensation scheme; and approved Kesko Group’s Risk Management Policy, insurance principles, the Group’s Treasury and investment policy, and real estate strategy.
The Board carried out a self-assessment, conducted via discussions between the Board, the Chairman and each Board member based on a predetermined discussion agenda. Topics covered in the assessment included Group strategy, reporting, risk management, efficiency of Board and Committee work, Group management and contingency planning for Group management, and individual Board member assessments. The Board reviewed a summary of the discussion results in its meeting. Special attention was paid to e.g. the practical implementation of the confirmed strategy throughout the organisation, closer monitoring of strategy implementation, and more extensive handling of risk management issues by the Board. In addition to the summary, each Board member received personal feedback.
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 from among its members the Committee Chairmen, Deputy Chairmen and 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 on matters based on the Committees’ preparatory work. The Committee Chairman reports on the Committee's work at the Board meeting following the Committee's meeting. The Committee Chairman 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.