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6 Managing director

The managing director is in charge of the day-to-day manage- ment of the company in accordance with the instructions and orders given by the board. The managing director may undertake acts which, considering the scope and nature of the operations of the company, are unusual or extensive, only with the authoriza- tion of the board. The managing director must also ensure that the accounting practices of the company comply with law and that the financial matters are handled in a reliable manner.

Recommendation 37 Appointment of the managing director The board shall appoint the managing director.

The board appoints the managing director of the company pur- suant to the Companies Act, unless the task has been delegated to the supervisory board pursuant to the articles of association.

To ensure the essential role of the managing director and an effective implementation of ownership control, it is justi- fied that the board should appoint the managing director also in companies that have a supervisory board. This ensures the clear division of duties and responsibilities between the management bodies of the company. The working group that has prepared the reform of the Companies Act suggests also that the board should appoint the managing director.

Recommendation 38 Managing director’s service contract

The managing director’s service terms and conditions shall be specified in writing in the managing director’s service contract approved by the board.

The position of the managing director in the company requires that the service terms and conditions are specified in writing in the form of an agreement approved by the board. The main items of the managing director’s service contract are described in accordance with Recommendation 48.

Recommendation 39 Information on the managing director

The company shall disclose the biographical details and the holdings of the managing director.

In connection with the appointment of the managing director, the company shall disclose the same biographical details as for directors (see recommendation 19). The information on the hold- ings of the managing director shall be disclosed upon commence of the post.


Recommendation 40 Managing director and chairman of the board

The managing director shall not be elected chairman of the board.

According to the Companies Act, the managing director may be elected board chairman only provided that the company has a supervisory board. The possibility to appoint the managing di- rector as board chairman has been restricted, because the duty of the board is to supervise the activities of the managing director.

The company should clearly define the areas of responsi- bility of the managing director and that of the board chairman to ensure that all the decision-making powers of the company are in practice not vested in a single individual. Generally this means that the managing director cannot be elected board chair- man. However, some special circumstances, such as extensive international operations, the company’s special development phase or the ownership structure of the company may justify the combining of these two positions.

If the company determines to appoint the same person as managing director and board chairman, it must explain its deci- sion.

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