Print

Main page ›  Investors ›  Corporate Governance

Corporate Governance

Elcoteq SE, the parent company of the Elcoteq Group, is a European Company that, as from January 1, 2008, is domiciled in Luxembourg.

Elcoteq applies primarily the laws of Luxembourg, the company’s Articles of Association, and the rules of procedure of the company’s Board of Directors and its committees in its corporate governance and management.

Elcoteq’s Series A shares are traded on the OMX Nordic Exchange Helsinki. Elcoteq complies with the Corporate Governance recommendations for listed companies prepared by the OMX Nordic Exchange Helsinki, the Central Chamber of Commerce and the Confederation of Finnish Industries EK as well as the insider guidelines of the OMX Nordic Exchange Helsinki and applicable Finnish securities market legislation.

General Meetings

The general meeting of shareholders is the supreme decision making body in Elcoteq and the forum in which its shareholders exercise their voting rights. Shareholder meetings consider the matters stipulated by legislation and the company’s Articles of Association. The language of the meetings is English. The Annual General Meeting was held on March 23 in the city of Luxembourg at the time and in the venue specified by the Board of Directors in the invitation to the Meeting.

If said date falls on a national holiday or bank holiday in Luxembourg or Finland, the Annual General Meeting will be held the second following business day. Board of Directors may decide that the shareholders can also participate in the meeting via remote access at an event held in Helsinki.

Group Administration

In addition to the general meeting of shareholders, the principal responsibility for the company’s administration and operations lies with the Board of Directors and the President and CEO. The Board is responsible for the proper organization of the company, and the strategy formulated by the Management Team is endorsed by the Board of Directors. The President and CEO is responsible for day-to-day operations. He is supported in his work by the Management Team.

The Elcoteq Management Team consists of the President and CEO, the COO, the CFO,  SVP Operations, SVP Legal Affairs and the three Presidents responsible for the business areas. The task of the Group’s management is to manage the Group in accordance with the strategy endorsed by the Board of Directors. Its main responsibilities include developing and executing the company’s strategy, monitoring and ensuring the company’s financial performance, steering and supervising the company’s operations, developing and maintaining the company’s internal operating procedures and guidelines and also its reporting and monitoring systems, and ensuring that the company’s activities comply with legal regulations.

The Management Team meets at least once a month. Its members report to the President and CEO or to the COO.

The company has organized its operations into three business areas that have profit responsibility: Personal Communications, Home Communications and Communications Networks. The President of each business area is responsible for customer accounts in his area and the related operations, supply chain management and further development of business and the service offering. In addition, the Group functions are responsible for aligning the consistent processes so that economies of scale can be achieved.

The Board of Directors

Responsibility for the management of the company and the appropriate organization of its operations lies with the Board of Directors, which comprises at least four and at most ten members who are elected by a General Meeting.

The Board of Directors applies Rules of Procedure, which stipulate
for example the following matters:

• composition and constitution of the Board of Directors
• conduct and number of meetings
• information on the company to be regularly submitted to the Board
• matters requiring regular consideration at Board meetings, and
• assessment of the Board’s performance.

The Board’s Rules of Procedure stipulate that a majority of the Board members must be independent of the company and at least two of this majority must be independent of the company’s principal shareholders. Five of the eight Board members elected by the Annual General Meeting (AGM) in 2008 are independent of the company and its principal shareholders. The term of office of the Board members expires at the close of the first AGM following their election. After the close of the Annual General Meeting, the new Board elects a chairman and a deputy chairman from among its members and decides on the establishment of its committees and their members.

According to the Rules of Procedure, the Board of Directors assesses its own activities and performance annually and develops its activities based on the results of this assessment.

The Board convenes regularly and at least six times during its term of office in accordance with a prearranged schedule, and holds extraordinary meetings at the request of a Board member or the company’s CEO. The Board is convened by its chairman. The Board of Directors constitutes a quorum when more than half of its members are present, either in person or represented by another Board member. Decisions are made with a simple majority of votes. In the event of a tied vote, the chairman’s vote is decisive. The Board’s meetings are also attended by the President and CEO and the COO of the company to present matters, and additionally executives and other persons when expert advisers are required.

In addition to the matters stipulated in the applicable legislation and Elcoteq’s Articles of Association, the Board of Directors also:

• decides the Group’s strategy and supervises its implementation
• evaluates and approves projects related to the company’s development and decides on the establishment or discontinuation of the Group’s subsidiaries
• approves the Group’s business plan and budget and monitors their implementation
• decides acquisitions and significant investments and monitors their implementation
• decides significant Group-level financing arrangements and the granting of collateral and guarantees
• decides the Group’s administration and organization
• decides the appointment and remuneration of the President and CEO, the COO and other top management
• decides the bonus and remuneration schemes applied to the company’s management and personnel
• considers and approves the annual and interim financial statements
• supervises risk management in the Group and compliance with its procedures
• supervises compliance with legislation and regulations and compliance with the company’s corporate governance guidelines
• decides donations to good causes, and
• presents proposals to general meetings.

The Board of Directors has eight members during the term of office ending at the 2009 Annual General Meeting. The Chairman of the Board is Mr. Antti Piippo and the Deputy Chairman Mr. Juha Toivola. The Board of Directors met 13 times during 2007. The attendance of its members at these meetings averaged 96%.

The Board’s Committees

The Board of Directors has four committees: a Working Committee, Audit Committee, Compensation Committee and Nomination Committee. The Board can also establish other committees for specific purposes.

The tasks of each committee are stipulated in their own rules of procedure which are approved by the Board of Directors. The committees report on their work to the Board at the Board meetings.

Working Committee

The Working Committee prepares matters for the Board related to the company’s business operations, strategy and business development. The Working Committee consists of at least three members and a chairman, who convenes the committee. The Working Committee is chaired by Mr. Antti Piippo, and the members are Mr. Henry Sjöman, Mr. Juha Toivola and Mr. Jorma Vanhanen. The Committee met 39 times during 2007.

Audit Committee

The Audit Committee supervises and prepares for the Board matters related to financial reporting, external auditing, the internal audit and risk management. It also supervises and enhances these functions in the company. The Committee consists of at least three independent Board members, who must have sufficient financial expertise for the task. The Committee meets regularly and at least four times during its term of office. The Committee is in regular contact with the company’s auditors.  The Audit Committee is chaired by Mr. Juha Toivola, and its other members are Mr. Martti Ahtisaari, Mr. Heikki Horstia, Mr. Eero Kasanen and Mr. François Pauly. The Committee met four times during 2007.

Compensation Committee

The Compensation Committee prepares for the Board matters related to the remuneration, performance-based compensation, benefits and perquisites policies applied to the company’s management and the remuneration policy of the company. The Committee consists of at least three independent Board members. The Committee meets during its term of office as necessary and is convened by its chairman. The Compensation Committee is chaired by Mr. Juha Toivola, and its other members are Mr. Martti Ahtisaari, Mr. Heikki Horstia, Mr. Eero Kasanen and Mr. François Pauly. The Committee met four times during 2007.

Nomination Committee

The Nomination Committee prepares matters related to the nomination and remuneration of the Board members, and seeks suitable individuals for nomination to the Board. The Committee consists of at least three members and is convened as necessary by its chairman. The Nomination Committee is chaired by Mr. Antti Piippo, and its other members are Mr. Henry Sjöman, Mr. Juha Toivola and Mr. Jorma Vanhanen. The Committee met once during 2007.

Fees Paid to the Board of Directors

As decided by the Annual General Meeting held in the spring of 2008, the Board members are each paid an annual fee for their Board work amounting to 60,000 euros, 60% of which is paid in cash and 40% in shares. In 2008, with respect to the latter payment, the Elcoteq shares are acquired between April 24 and May 8, 2008 within the limits set by the rules governing insider trading. The acquired shares may not be surrendered before the following Annual General Meeting unless the individual’s membership of the Board ends earlier. 

The Annual General Meeting in 2008 decided to pay an additional monthly fee of 45,000 euros to the full-time Chairman of the Board and an additional monthly fee of 10,000 euros to the Deputy Chairman of the Board. 

In addition to the statutory pension cover, additional pension arrangements allow some of the Board members to retire at the age of 60. The members of the company’s Board of Directors do not participate in Elcoteq’s stock option plans.

Board’s Fees Approved by the Annual General Meeting on March 25, 2008

Chairman 60,000 euros/year + 45,000 euros/month
Deputy Chairman 60,000 euros/year + 10,000 euros/month
Other members 60,000 euros/year

The President and CEO

The Board of Directors appoints a President who is responsible for overall management of the company as required by legislation and in accordance with the instructions and stipulations of the Board of Directors.

Since January 1, 2004, the President and CEO of the company has been Mr. Jouni Hartikainen, M.Sc. (Eng.).

President and CEO’s Remuneration

The President and CEO’s monthly salary is 87,356 Swiss francs, i.e. approximately 53,169 euros, and he also receives the usual fringe benefits. In addition to his monthly salary, the President and CEO receives a performance-based bonus in accordance with the incentive scheme in force to a maximum amount of 50% of his basic annual salary. The salary, other short-term benefits and share-based payments paid to the President and CEO in 2007 totaled some 736,000 euros.

In addition to the statutory pension cover, additional pension arrangements allow the President and CEO and the Deputy CEO to retire at the age of 60.

The CEO’s notice period is six months. In the event that the CEO’s employment contract is terminated by the company without proper cause, the CEO will be paid severance compensation equivalent to 12 months’ monetary salary.

Management Remuneration and Incentive Schemes

The Board of Directors decides on the fees and remuneration schemes applicable to the members of the Management Team based on a proposal by the Compensation Committee. The level and competitiveness of the salaries is reviewed on the basis of comparison data obtained from international evaluation systems.

The company operates a bonus system under which a part of the bonus is based on achievement of the Group’s financial targets and a part on achievement of each director’s individual targets. The Board of Directors determines the criteria for the financial targets based on a proposal by the Compensation Committee. Individual targets are determined during performance appraisal discussions. The maximum amount to be paid to members of the Management Team for 2008 is 50% of their basic annual salaries.

The company also has other incentive plans. In 2007, Elcoteq’s Board of Directors decided on a share subscription plan for the commitment and motivation of key employees in the Group’s middle to senior level management.

Internal Control

Elcoteq employs a reporting system to monitor its business performance in which corporate sales are reported daily and results are reported monthly. Forecasts for the following 12 months are drawn up monthly. The results and forecasts include an income statement, a balance sheet and key financial indicators. The company monitors fulfillment of its strategic goals in quarterly strategy meetings. The meetings review the key indicators that describe the business plan targets. Elcoteq updates its business plan once a year for a three-year period.

Elcoteq has outsourced its internal audit to KPMG Oy Ab Risk Advisory Services. The internal audit is coordinated by Elcoteq’s risk management function. The internal audit reports administratively to the CFO but in matters related to the internal audit directly to the Audit Committee of the Board of Directors. The Audit Committee also decides annually the areas that the internal audit will focus on. The internal audit function is independent of the company’s external auditors.

Elcoteq performs numerous audits with KPMG Oy Ab Risk Advisory Service each year to establish, among other things, the functionality of certain preselected processes and the adequacy and efficacy of controls in various units. The most important observations resulting from the audits are reported in detail to the management of each unit in question and a summary of the audits is submitted to the Audit Committee.

Insider Matters

The Insider Rules endorsed by the Board of Directors and adopted by the company on March 1, 2000 fully comply with and exceed the requirements of the guidelines recommended by the OMX Nordic Exchange Helsinki. The Insider Rules are available to all the company’s employees through the company’s intranet.

Under the company’s Insider Rules, insiders may engage in trading in the company’s shares only at times when the market has the fullest possible knowledge of matters that could influence the share value. For this reason, Elcoteq’s permanent insiders are not permitted to trade in the company’s shares during the time between the closing of its reporting period and the date of the results publication.

As from the beginning of 2006, the company has maintained a public insider register that comprises the members of the Board of Directors, the President and CEO, the COO, the members of the Management Team and the auditor.

Individuals who by virtue of their duties regularly receive information regarded as insider information are included in the company’s nonpublic insider register. Elcoteq also maintains project specific insider registers.

The insider registers are maintained by Elcoteq’s legal affairs department, which also updates the information on Elcoteq’s insiders in the register maintained by the Finnish Central Securities Depository. The company’s public insider register can be viewed on the company’s website.

Elcoteq’s shares remain in the book-entry securities system maintained by the Finnish Central Securities Depository even after the transfer of domicile. The insider registers will remain as before. As of January 1, 2008, the legislation of both Finland and Luxembourg will be applied in insider supervision. The Finnish Financial Supervision Authority supervises compliance with legislation and regulations on project-specific insider registers, while supervision of the public insider register is handled by CSSF (Commission de Surveillance du Secteur Financier).

The Auditor

According to the company’s Articles of Association, the company shall have one or more statutory auditors. The Annual General Meeting appoints the auditor. The term of office ceases at the close of the first Annual General Meeting following his election.

On the proposal of the Board's Audit Committee, the firm of authorized public accountants KPMG Audit S.à.r.l. under the supervision of Mr. Philippe Meyer was appointed as Elcoteq’s auditor for the financial year ending on December 31, 2008. The auditors are paid a fee appropriate to the scope of their work.