Corporate governance 2009-2010

CORPORATE GOVERNANCE STATEMENT OF VAAHTO GROUP FOR THE 2009-2010 fiscal year

Applicable regulations

Vaahto Group’s administration is based on the Finnish Companies Act and the Articles of Association of the Group’s parent company, Vaahto Group Plc Oyj.

The company follows the NASDAQ OMX Helsinki corporate governance code 2010 for Finnish listed companies. The governance code issued by the Securities Market Association took effect on October 1, 2010, and it is publicly available, e.g., on the Securities Market Association’s Web site via the address www.cgfinland.fi.

Administration of Vaahto Group

In accordance with the Companies Act, the Group’s business operations and administration are the responsibility of the following bodies: the Annual General Meeting, which elects the members of the Board of Directors of the parent company, and the CEO, appointed by the Board.

Vaahto Group Plc Oyj’s highest decision-making body is the Annual General Meeting, where the shareholders exercise their authority. The Board of Directors is responsible for the company’s administration and appropriate operation. As the parent company of the Group, Vaahto Group Plc Oyj is responsible for the management, strategic planning, financial administration and financing, and human resources management of the Group.

The Group’s business operations are divided into two divisions, Pulp & Paper Machinery and Process Machinery. The activities and results of these are the responsibility of the Group management team.

Annual General Meeting

The company’s highest decision-making body is the Annual General Meeting. An extraordinary general meeting is arranged when necessary. This is called by the Board of Directors. Shareholders are invited to the Annual General Meeting through a meeting invitation published in a national newspaper selected by the previous Annual General Meeting. The invitation provides the shareholders with the necessary information about the issues to be addressed at the meeting.

The Annual General Meeting must be held no more than six months after the end of the company’s fiscal year. The AGM makes decisions on the issues falling under its mandate as determined by the Companies Act, including the verification of the financial statements, the payment of dividends, the discharge from liability of the Board members and the CEO, and the selection and fees of the Board members and the auditors.

The Annual General Meeting is attended by the CEO and a majority of the Board members. A person running for a position on the Board for the first time attends the AGM that decides on the selection.

Board of Directors

  • Activities of the Board

The Board of Directors of the parent company, which also acts as that of the Group, is responsible for the Group’s administration and appropriate operation, and it decides on issues that are highly significant in light of the scope of the Group’s operations.

Some of the key responsibilities of the Board are to

  • confirm the Group’s strategy and objectives, monitor their implementation, and commence corrective measures if these should be necessary
  • decide on significant investments as well as acquisitions and real-estate transactions
  • handle and approve the interim management statements, interim reports, and financial statements
  • decide on the Group’s financial policies and financing methods
  • approve the dividend policy and make a proposal to the AGM concerning distribution of dividends
  • be in charge of arrangement of the Group’s risk management and internal monitoring
  • appoint and relieve the CEO, and decide on the terms of the CEO’s employment
  • confirm the Group’s strategy and decide on the central principles governing the Group’s compensation system

The Board of Directors regularly evaluates its own activities and work methods.

Issues are handled at Board meetings in accordance with an agenda prepared for each meeting. The Group’s chief executive officer acts as secretary of the Board. The minutes of each Board meeting are commented upon and accepted at the next meeting.

The Board meets regularly, once a month, and at other times, if necessary. During the 2009–2010 fiscal period, the Board met 19 times. There was 99% attendance by the Board members.

The presenter at Board meetings is the company’s CEO or one of the Group’s personnel authorized by the CEO. The CEO is responsible for providing the Board with sufficient information for assessing the Group’s operations and financial situation. The CEO is also responsible for implementing the Board’s decisions and reports on this to the Board.

The Board members are obliged to provide the Board with sufficient information for assessment of their qualifications and level of independence and to report any changes to this information.

  • Composition of the Board

According to the Articles of Association, the Board of Directors has a minimum of three and a maximum of six members, whose term of office ends at the end of the first full Annual General Meeting following the election. The Board members are selected by the Annual General Meeting. The chairman and vice-chairman of the Board are selected by the Board from among its members.

The names of candidates proposed for Board positions are published in the invitation to the Annual General Meeting where the candidate is supported by shareholders holding a minimum of 10% of the votes as determined by the number of shares and if the candidate has accepted the candidacy. Names of candidates nominated after publication of the AGM invitation are published separately. A person selected as a Board member must meet the qualifications for the position and have the opportunity to allocate enough time to handle the position.

The AGM of December 16, 2009, confirmed that the Board shall have five members. Seppo Jaatinen, Heikki Marttinen, Martti Unkuri, Antti Vaahto, and Mikko Vaahto were elected for the Board. The Board elected Seppo Jaatinen as chairman and Mikko Vaahto as vice-chairman. Heikki Marttinen has January 27, 2010 resigned from the Board.

The Extraordinary General Meeting of June 4, 2010, confirmed that the Board shall have six members. Rainer Häggblom and Reijo Järvinen were elected for the Board, in addition to the previous members. The Board elected Rainer Häggblom as vice-chairman.

  • Information about Board members

Chairman Seppo Jaatinen, M.Sc. (Econ.), b. 1948

Senior Partner, Foxhill Oy

Member and chairman of the Vaahto Group Plc Oyj Board of Directors since 2000

Previous work experience:

Interpolator Oy CEO and executive vice president

Amer Group Plc’s development director

Attendance to the Board meetings 2009-2010: 19/19

 

Vice-Chairman Rainer Häggblom, b. 1956, M.Sc.(For.), M.S.Sc.(Econ. and Business Adm.)

Vision Hunters Ltd. Oy, chairman of the Board and founder

Member and vice-chairman of the Vaahto Group Plc Oyj Board of Directors since 2010

Previous work experience:

Pöyry Forest Industry Consulting Oy, CEO and chairman of the Board

Most significant positions of trust:

The Forest Company Ltd., chairman of the Board

Preseco Oy, member of the Board

Attendance to the Board meetings 2009-2010: 5/5

 

Reijo Järvinen, b. 1948, M.Sc.(Chem.)

Senior Advisor, Attorney Krogerus Oy

Member of the Vaahto Group Plc Oyj Board of Directors 2010 –

Previous work experience:

Finnvera Oyj, regional director

Most significant positions of trust:

PHP Holding Oy, member of the Board

PHP Liiketoiminta Oyj, member of the Board

Lahden Autokori Oy, member of the Board

Attendance to the Board meetings 2009-2010: 5/5

 

Heikki Marttinen, b. 1946, M.Sc. (Econ.),

Member of the Vaahto Group Plc Oyj Board of Directors 16.12.2009 – 27.1.2010

Attendance to the Board meetings 2009-2010: 2/2

 

Martti Unkuri, M.Sc. (Tech.), b. 1936

Member of the Vaahto Group Plc Oyj Board of Directors since 2000

Previous work experience:

CEO of Rauma Oy

Attendance to the Board meetings 2009-2010: 18/19

 

Mikko Vaahto, b. 1963, with vocational qualifications in business and administration

Member of the Vaahto Group Plc Oyj Board of Directors since 1994

Attendance to the Board meetings 2009-2010: 19/19

 

Antti Vaahto, M.Sc. (Econ.), M.Sc. (Tech.), MBA, b. 1947

CEO of Vaahto Group Plc Oyj in 1984–2009

Member of the Vaahto Group Plc Oyj Board of Directors since 1984

Most significant positions of trust:

Mutual insurance company Fennia: member of the board

Insurance company Fennia Life: member of the board

Attendance to the Board meetings 2009-2010: 19/19

 

Board member Antti Vaahto has been employed by the company until September 20, 2010 and is also a major shareholder. Mikko Vaahto, employed by the company until November 13, 2008, is also a major shareholder of the company. Seppo Jaatinen and Martti Unkuri do not own any of the company’s shares, nor do they have interdependence with the company in any other way.

  • Compensation of Board members

The compensation for Board members is determined each year by the Annual General Meeting. The Board members have not received shares in the company as compensation. The company currently has no stock option plan.

The Annual General Meeting of December 16, 2009, decided to pay Board members the following attendance fees as annual compensation amounts: 26,000 euros to the CEO and 19,000 euros to each of the members.

The Annual General Meeting of December 15, 2008, decided to pay Board members the following attendance fees as annual compensation amounts: 26,000 euros to the CEO and 19,000 euros to each of the members.

In addition, Board members are entitled to a per diem and travel allowance in accordance with the Group’s general travel regulations. No attendance fees are paid to persons employed by Vaahto Group for membership of a subsidiary’s board of directors.

Fees paid to Board members in the 2009–2010 financial year for Board duties:

Seppo Jaatinen, chairman                       26.000 euros

Rainer Häggblom                                       4.750 euros

Reijo Järvinen                                            4.750 euros

Martti Unkuri                                            19.000 euros

Antti Vaahto                                              19.000 euros

Mikko Vaahto                                           19.000 euros

Board member Antti Vaahto has been employed by the company until September, 2010. Salaries paid during the fiscal year 2009-2010 for the Board members according to the employment contract:

Antti Vaahto  8.720 euros

Board committees

The Board has no committees.

Supervisory Board

The company has no Supervisory Board.

CEO

The Board appoints the parent company’s CEO, who acts as the Group’s president. The CEO is responsible for day-to-day management of the Group in accordance with the Finnish Companies Act, the Articles of Association, and instructions from the Board of Directors. The CEO is neither chairman nor vice-chairman of the Board.

Vaahto Group Plc Oyj’s CEO for fiscal year 2009–2010 has been Anssi Klinga.

  • Information about the CEO

Anssi Klinga, M.Sc. (Econ.), b. 1965

CEO of Vaahto Group Plc Oyj since May 1, 2009

Previous work experience:

CFO of Vaahto Group Plc Oyj in 2004–2009

CFO of Eimo Oyj

CFO of Rautaruukki Oyj

CFO of Componenta Oyj

Suomen Unilever Oy’s financial manager.

Business organization

The Group’s operations have been separated into two divisions: Pulp & Paper Machinery and Process Machinery. The activities and results of these are the responsibility of the Group management team. The CEOs of the subsidiaries and the managers of the business units of the management team of the Group.

Information about the other members of the Group’s management

 

Timo Kerola, b. 1960, M.Sc. (Tech.)

Vaahto Pulp & Paper Machinery Distribution (Shanghai) Co., Ltd., CEO 2006 –

Previous work experience:

Metso Paper (China) Co., Ltd., Area Vice President

Metso Paper Inc. Beijing Representative Office, Representative

Valmet Karlstad Inc. , Senior Sales Manager, Far East and Oceania

Valmet Karlstad Inc. , Senior Sales Manager, Central and South America

Valmet Korea Inc., Area Sales Manager, Korea, China, Japan and Taiwan

 

Christian Kessen, b. 1963, M.Sc. (Tech.)

Stelzer Rührtechnik International GmbH, CEO 2007 –

Stelzer Rührtechnik International GmbH, Manager of Engineering 1991 – 2006

 

Tapio Mattila, b. 1960, M.Sc. (Tech.)

Vaahto Ltd, Vaahto Pulp & Paper Service, President 2009 –

Vaahto Oy, Project  Business Manager  1998 – 2009

Previous work experience:

Tampella/Valmet Oy, Sales Manager, Department Manager

 

Jyrki Strengell, b. 1960, M.Sc. (Tech.)

Vaahto Ltd, CEO 2009 –

Vaahto Pulp & Paper Machinery, President 2009 –

Vaahto Ltd, Sales Manager 2005 – 2009

Previous work experience:

Metso Paper Ltd, Järvenpää units, Sales Manager

Enso Gutzeit Ltd, Anjala paper mill, Production and Customer Service Manager

Yhtyneet Paperitehtaat Ltd, Kotka, Walkisoft Development and Production Engineer

Most significant positions of trust:

Banmark Oy, Chairman of the Board of Directors

 

Tom Tarkkinen, b. 1962, engineer

Japrotek Oy Ab, CEO 2009 –

Japrotek Oy Ab, Production Manager 2005– 2009

Japrotek Oy Ab, different positions since 1989

Previous work experience:

Westmatic Oy, Desing Engineer

 

Pekka Viitasalo, b. 1955, technician

AP-Tela Oy, CEO 1994 –

Previous work experience:

AP-Konepaja Oy, Project Manager

 

Compensation of the CEO and other members of the company’s management

The CEO’s salary and other financial benefits are decided by the Board. Compensation for other members of the management is decided upon by the CEO and the chairman of the Board.

The Group currently has no stock option plan.

No special conditions for retirement or pension benefits have been specified for the members of the Group’s management. According to the employment contract of CEO Anssi Klinga, both the company and the CEO are entitled to terminate the contract without any particular reason. In such a case, the period of notice on either side is three months. If the company terminates the contract, the CEO will be paid a sum of money corresponding to the total salary for 12 months in addition to the salary paid during the period of notice.

Salaries and fees paid to the CEO for the 2009–2010 fiscal year:

Anssi Klinga 209.098 euros

Body responsible for the duties of the audit committee

The company has no audit committee; instead, the duties of the audit committee are attended to by the Board of Directors of the company.

Internal monitoring, risk management and internal audit

Internal monitoring:

The Group’s business and administration are primarily monitored and controlled by means of the Group’s management system. The Group has a financial reporting system whose purpose is to provide the Group and profit center management with sufficient information for planning, control, and monitoring of operations.

Risk management:

The objective of the Group’s risk management process is to identify any risks that pose a threat to the business operations, evaluate them, and develop the necessary risk management methods. Business-related risks of material, consequential, and liability losses are covered by appropriate insurance policies.

Internal auditing:

With regard to the nature and scope of its business operations, the Group has not deemed it appropriate to establish a separate internal auditing organization. Rather, its tasks are included in the duties of the business organization.

Insider administration

Vaahto Group Plc Oyj follows the NASDAQ OMX Helsinki Insider Guidelines. The public insider register includes statutory insiders and insiders as determined by the Board of Directors of the company. In accordance with the Securities Markets Act, permanent insiders comprise the company’s Board members, CEO, and auditors. In addition, the company has defined as insiders those members of the company’s top management who regularly receive insider information and are entitled to make decisions concerning developments and business arrangements related to the issuer of shares. Subsidiary-specific insider registers include persons who regularly receive insider information in the course of their duties.

Vaahto Group Plc Oyj’s public and subsidiary-specific insider registers are maintained by the company. The insider register can be seen at the company’s head office.

The company’s insiders are not allowed to trade in shares of the company within the 21 days before publication of a financial statement or interim report.

Audit

In accordance with the Articles of Association, the company’s statutory audit is performed by one or two qualified auditors, who must be auditors or auditing firms certified by Finland’s Central Chamber of Commerce. The auditors’ term ends at the end of the first full Annual General Meeting after the election.

The Board’s proposal for auditor(s) is indicated in the invitation to the Annual General Meeting, or, if an auditor candidate is not known to the Board at the time the invitation is published, the name of the candidate(s) shall be published separately.

The Annual General Meeting of December 16, 2010, selected public auditing firm Ernst & Young Oy as the company’s auditor, with Panu Juonala, CPA, as chief auditor.

Auditors’ fees from the Group in the 2009–2010 fiscal period totaled 80,267 euros, of which audit fees accounted for 7,756 euros, with consulting and other fees accounting for the remaining 88,023 euros.

Information

Each year, the company publishes an annual report and an interim report in both Finnish and English. The interim report is published for the first six months of the fiscal period. For Q1 and for Q1–Q3 of the fiscal period, the company publishes an interim management statement instead of an interim report.

Information about financial statements, interim reports, and interim management statements is published in exchange reports. The annual report is sent by mail to the shareholders of the company and to certain organizations and individuals according to the mailing list maintained by the company. The interim report is distributed in accordance with a separate mailing list. In addition, the annual report and interim report are published on the company’s Web site www.vaahtogroup.fi. The company’s other press releases are also available on the Web site.