Board of directors and its committees

Board of Directors

Composition, term of office and selection process for the Board of Directors

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. The Board elects the Chairman and the Deputy Chairman from among its members for the whole term of the Board.

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.

The Annual General Meeting of Kesko Corporation 28.4.2020 have made a resolution to establish the Shareholders' Nomination Committee ("Nomination Committee") The Nomination Committee is a body of Kesko shareholders the purpose of which is to prepare proposals related to the number, election and remuneration of board members to the Annual General Meeting and, when necessary, to an Extraordinary General Meeting. The main duty of the Nomination Committee is to ensure that the Board of Directors and its members have the expertise, knowhow and experience adequate for Kesko's needs, and to prepare reasoned proposals for this purpose to the General Meeting.

The rules of procedure of the Shareholders' Nomination Committee

Board composition

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 Annual General Meeting held on 8 April 2019 confirmed the number of Board members to be seven (7).

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
  • Jannica Fagerholm (M.Sc. Econ.)
  • 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 members of Kesko's Board of Directors are non-executive directors. The Board evaluates the independence of its members on a regular basis in accordance with Recommendation 10 of the Finnish Corporate Governance Code. The Board carried out an independence evaluation in its organisational meeting held after the General Meeting of 28 April 2020. Based on that independence evaluation, the Board considered Toni Pokela not to be independent of the Company's significant shareholder, the K-Retailers’ Association, of which Pokela is the Chairman of the Board.

The election of Kesko Group’s CFO Jukka Erlund to the Board of Directors of Finnair Plc on 20 March 2019 resulted in an interlocking control relationship, as Piia Karhu, Finnair Plc’s Senior Vice President, Customer Experience and a member of the Executive Board, is a member of Kesko Corporation’s Board of Directors. As a result of the interlocking control relationship, the majority of the members of Kesko’s Board are considered not to be independent of the Company. Kesko Corporation and Finnair Plc have a normal business relationship and the companies are not financially dependent on each other. The interlocking control relationship was not considered as a whole to result in conflicts of interest or to jeopardise the ability of the Board members to act in the interests of the Company and all its shareholders. The company’s Board of Directors has given consent to Erlund being a member of the Board of Directors of Finnair Plc.

A Board member is obliged to provide the Board with necessary information for the evaluation of independence.

Main duties 

Kesko's Board of Directors is responsible for the Company's corporate governance and for the proper organisation of its operations. The Board is responsible for the proper organisation of the Company's accounting and financial management controls. 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:

Strategic and financial matters

  • deciding on the Group strategy and confirming the divisions’ strategies
  • confirming the Group's budget and rolling forecast, including a capital expenditure plan
  • reviewing the Group’s most significant risks and uncertainties
  • deciding on strategically or financially significant individual investments, acquisitions, divestments or arrangements, and commitments
  • confirming Kesko's values
  • approving key Group policies, such as the treasury and investment policy and risk management policy
  • establishing a dividend policy and being responsible for shareholder value performance

Organisation and personnel matters

  • appointing and discharging the Company's President and CEO, approving his/her managing director's service contract and deciding on his/her remuneration and other financial benefits, and making corresponding decisions also for the Deputy to the President and CEO
  • deciding on the appointments of the Group Management Board members responsible for lines of business, their remuneration and financial benefits
  • deciding on the essential structure and organisation of the Group
  • ensuring the proper operation and supervision of the management system
  • deciding on management authorisation rules
  • deciding on the principles of Kesko's commitment and incentive schemes, the terms and conditions and distribution of shares or options under the remuneration policy in force, and monitoring the results of the schemes

Reporting matters

  • reviewing and adopting the Group’s financial statements, half year financial reports and interim reports and related stock exchange releases and the Report by the Board of Directors
  • reviewing Kesko’s Annual Report

Other duties

  • submitting Board proposals to the Annual General Meeting on matters such as dividend distribution, Auditor, and authorisations to issue and acquire shares
  • approving the Board’s principles concerning diversity
  • being responsible for the other statutory duties prescribed to the Board of Directors by the Limited Liability Companies Act or other, and for duties prescribed by the Finnish Corporate Governance Code.

 

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. In the Company, the Board members do not represent the parties 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 2019, the Board held 10 meetings. 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 meeting. 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 2019, 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 2019, the Board, among other things, further detailed and clarified the strategy approved for Kesko Group in spring 2015, monitored the execution of the strategy, and made decisions on acquisitions and divestments in line with the Group's confirmed strategy, such as the acquisition of Heinon Tukku Oy in the grocery trade division, the acquisition of Fresks Group by K-rauta AB in the building and technical trade division, and the acquisition of Laakkonen Group's Volkswagen, Audi and SEAT businesses in the car trade division. The Board monitored the financial performance of previously acquired companies and their integration into Kesko Group, and the implementation of divestments decided. The Board approved new medium-term financial targets for the Group. The Board reviewed matters such as Kesko's Annual Report and goodwill impairment testing, and decided on the establishment of a new share-based compensation plan and the use of donation funds approved by the Annual General Meeting.

The Board carried out a self-assessment, conducted via discussions between the Board's 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 at its meeting. Focus areas included strategy-driven corporate leadership, the temporal aspect of strategy review, the scope of market and competitor information, the increased importance of cyber security in risk management, and an open and appreciative working atmosphere for the Board and its Committees. Focus areas included strategy-driven corporate leadership, the scope of market and competitor information, reviewing changes in risks, and an open, appreciative and conversational working atmosphere for the Board and its Committees In addition to the summary, each Board member received personal feedback

 


Board’s Committees

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.

All members of both committees are independent of the Company's significant shareholders, and the majority of the members of both committees are also independent of the Company. In the election of committee members, the competence requirements for the committee in question 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. 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.

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