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3 Supervisory board

In accordance with the Companies Act, a company may have a supervisory board that supervises the management of the company and presents its opinion on the financial statements and on the auditor’s reports to the general meeting. The supervisory board may also issue instructions for the purposes of advising the board in matters, which are extensive or important in principle.

The practice of using supervisory boards has been on the decline in recent years. One possible reason for this may be that the practical possibilities of a supervisory board to supervise the management of the company are of minor significance.

Recommendation 5 Limitation of the powers of the supervisory board

If the company has a supervisory board, its powers shall be restricted to supervision of the management and issuing of instructions.

A one-tier management model where the management of the company consists of the board and the managing director facilitates the effective operation of the company. In the one-tier management model, the duties and areas of responsibility of the board and the managing director are clear.

In a two-tier management model, the shareholders delegate part of their decision-making power vested in the general meet- ing to the supervisory board. Consequently, ownership control is implemented more directly and effectively through the one-tier management model.

If the company opts for a two-tier management model including a supervisory board, the powers of the supervisory board should be restricted in the articles of association to the permitted minimum. Thereby the general meeting will elect the board, and the board will appoint the managing director. The supervisory board must, however, always discharge the duties pertaining to it pursuant to compelling legislation.

Recommendation 6 Information on the supervisory board

The company shall describe the duties and the opera- tion principles of the supervisory board as well as the criteria for compensation of the members of the super- visory board.

The information of the duties, operating principles and compen- sation criteria of the supervisory board permits the shareholders to evaluate the effectiveness of the operations of the supervisory board.


4 Board

The board is responsible for supervising the management and the proper organisation of the operations of the company. The board gives orders and instructions to the operative management of the company, appoints and dismisses the managing director, approves the strategic goals and the principles of risk manage- ment for the company and ensures the proper operation of the management system. According to good corporate governance the board must also ensure that the company has duly endorsed the corporate values applied to its operations.

The duty of the board is to promote the interests of the company and those of all of its shareholders. The directors do not represent the interests of the parties who have proposed their election as members of the board.

Recommendation 7 Charter of the board

The company shall adopt a written charter for its work and describe its essential content.

Efficient operation of the board requires, that the essential du- ties and working principles of the board be defined in a written charter. The information that can be obtained from the charter permits the shareholders to evaluate the operation of the board.

Recommendation 8 Meetings of the board

The company shall report the number of board meet- ings held during the reporting year as well as the aver- age attendance of directors at the board meetings.

The information on the number of board meetings and attendance frequency permits the shareholders to evaluate the effectiveness of board work. The average attendance of directors at the board meetings can be presented as a percentage figure calculated on the basis of the meetings held and the number of attending directors.

Recommendation 9 Performance evaluation of the board

The board shall conduct an annual evaluation of its performance and working methods.

To ensure the effectiveness of board work, the performance and working methods of the board shall be evaluated regularly. This can be done as an internal self-evaluation or by using an external evaluator.

Recommendation 10 Election of the directors The general meeting shall elect the directors.

According to the main rule of the Companies Act, the general meeting shall elect the directors. By electing the directors, the

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