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 con-sists of a minimum of five (5) and a maximum of eight (8) members. The General Meeting decides on the number on Board Members, elects all Board members and makes resolution on their remuneration. Related to these items, the Shareholders' Nomination Committee prepares the proposals for 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.
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, principles of operation, meeting practice and 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. Board members are to attend at least 80% of all Board meetings.
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
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.
The Board's self-assessment on its operations
As part of the development of the Board's work and operations, the Board assesses its operations and working methods regularly, at least once a year. An external party is used for the assessment at least once during the Board's three-year term of office.
Board of Directors' operations in 2020
In 2020, the Board held 18 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.
In 2020, the Board focused in particular on the impacts of the Covid-19 pandemic and global economic uncertainty on the sales and result on Kesko and K Group, as well as preparatory measures concerning the situation. Kesko issued a negative profit warning on 18 March 2020 to announce the Board's decision to withdraw the guidance concerning net sales and change the guidance concerning operating profit, issued in connection with the financial statements release on 5 February 2020. Kesko issued positive profit warnings on 10 July 2020 and 17 September 2020 to announce Board decisions concerning an updated operating profit guidance. The Board decided to specify its 2020 operating profit guidance in connection with the Q3/2020 interim report on 29 October 2020. Due to the Covid-19 pandemic situation, the Board decided to cancel the Annual General Meeting that was convened for 30 March 2020, and convened a new Annual General Meeting for 28 April 2020.
As in previous years, in 2020, the Board reviewed the financial reports and monitored the Group's financial situation, approved the most significant capital expenditure, 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. The Board submitted proposals to the Annual General Meeting concerning e.g. a share issue without payment (share split).
During 2020, the Board further clarified and specified the Kesko Group strategy first approved in spring 2015, monitored the execution of the strategy, and decided on acquisitions in line with the confirmed strategy, such as the acquisition of Carlsen Fritzøe Handel AS in the building and technical trade division. The Board discussed the progress made in the strategic review of operations in the Baltics and the change in the consolidation method of Kesko Senukai. 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, among other things, Kesko's Annual Report, the results of goodwill impairment testing, and a significant tendering of IT services, confirmed Kesko's new emissions targets, and decided on establishing new remuneration-related share plans, and on the use of donation funds approved by the Annual General Meeting, and approved the new K Compliance operating model and updated Group policies.
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, 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 corporate leadership driven by Group and division strategies, sharing information on key risks, and an open, conversational and equal working atmosphere for the Board and its Committees. In addition to the summary each Board member received personal feedback.
