Group structure
The parent company of the Finnair Group is Finnair Plc, which has 18 subsidiaries. The most significant subgroups are Suomen Matkatoimisto Oy, Matkatoimisto Oy Area and Finnair Catering Oy. Other notable subsidiaries are Oy Aurinkomatkat-Suntours Ltd. Ab, Finnair Aircraft Finance Oy, Finnair Cargo Oy, Northport Oy and Finnair Facilities Management Oy. The Finnair Group's airlines are, in addition to the parent company, Aero Airlines AS and the Swedish company Nordic Airlink Holding AB. The Finnair Group's 22 business units and subsidiaries are organized into four divisions: Scheduled Passenger Traffic, Leisure Traffic, Aviation Services and Travel Services.
Annual General Meeting and exercising of voting rights at the Annual General Meeting
Ultimate authority in Finnair Plc is exercised by the company's shareholders at the Annual General Meeting. The Annual General Meeting is convened by the company's Board of Directors. In accordance with the Companies Act the Annual General Meeting decides on, among other things, the following matters:
- The number, election and remuneration of the Board of Directors
- The number, election and remuneration of the auditors
- The approval of the financial statements
- The distribution of dividends
- The amendment of the Articles of Association.
The Articles of Association of Finnair Plc do not contain any redemption clauses nor any restrictions on voting rights. The company has one series of shares.
Board of Directors
Composition and term of office
The Board of Directors of Finnair Plc consists of a chairman and at least four and at most six members. The Annual General Meeting elects the Chairman and the Members of the Board of Directors for one year at a time. The Board of Directors elects a Vice Chairman from among its members.
On April 7, 2004 the Annual General Meeting of Finnair Plc elected Christoffer Taxell as Chairman of the Board of Directors, and as Members of the Board Kari Jordan (Vice Chairman), Samuli Haapasalo, Markku Hyvärinen, Veli Sundbäck, Helena Terho and Kaisa Vikkula. The Board of Directors' term of office expires at the end of the Annual General Meeting to be held on March 23, 2005. All members of the Board are non-executive and independent as defined in the Finnish rules and regulations.
Duties and meetings
The Board of Directors is responsible for the company's operations and finances, it convenes the Annual General Meeting and it prepares the matters to be dealt with at the Annual General Meeting. The Board of Directors is also responsible for implementing the decisions of the Annual General Meeting.
The Board of Directors appoints and dismisses the President & CEO and decides on his/her salary. The Board of Directors also appoints and dismisses the deputy to the President & CEO. The Board of Directors selects the members of the Group's Board of Management and decides on their terms of employment, taking into account the guidelines of personnel strategy and remuneration system in accordance with the company's administrative principles. The Board of Directors is responsible for ensuring that the company's accounts, budget monitoring systems and risk management are arranged in accordance with the company's administrative principles.
The Board of Directors is also responsible for ensuring that the openness and fairness referred to in the company's administrative principles are implemented in the information given in the company's financial statements.
The company's business name is signed by the Chairman of the Board of Directors and the President & CEO each separately or two members of the Board of Directors together. The Board of Directors grants and revokes rights to sign the business name as well as powers of procuration. The holders of powers of procuration sign the business name two together or each separately with one member of the Board of Directors.
The Board of Directors meets on average 8-10 times per year. The Board of Directors met ten times in 2004. The average attendance percentage of the members of the Board of Directors at the meetings of the Board was 95.
The President & CEO of Finnair Plc, or a senior member of Finnair Group management nominated by the President and CEO, acts as the presenting officer at meetings of the Board of Directors. The Finnair Group's SVP, Legal Affairs Tero Palatsi acts as secretary to the Board of Directors. The Board of Directors evaluates its working practices regularly.
The Board Charter can be viewed at Finnair Group's Internet site www.finnair.com/investor.
Committees
The Board of Directors has established a Salary and Appointments Committee as well as a Audit Committee. The Salary and Appointments Committee consists of Chairman of the Board Christoffer Taxell as well as Members of the Board Kari Jordan and Samuli Haapasalo. President & CEO Keijo Suila acts as the presenting officer. The committee met three times in 2004.
The Audit Committee consists of Markku Hyvärinen as chairman as well as Helena Terho and Kaisa Vikkula as members.
The Finnair Group's SVP, Legal Affairs Tero Palatsi acts as secretary to the both committees. The Committee Charters can be viewed at Finnair Group's Internet site www.finnair.com/investor.
Remuneration and other benefits
The monthly remuneration and attendance allowances decided by the Annual General Meeting for Members of the Board of Directors in 2003 were:
- Chairman's monthly remuneration 3,000 euros/month
- Vice Chairman's monthly remuneration 1,600 euros/month
- Member of the Board's monthly remuneration 1,400 euros/month
- Attendance allowance 200 euros/meeting/person
The Board of Directors are entitled to a daily allowance and compensation for travel expenses in accordance with Finnair Plc's general travel rules. In addition, Members of the Board of Directors have a limited right to use ID tickets in accordance with Finnair Plc's ID ticket rules.
The members of Finnair Plc's Board of Directors were paid monthly remuneration and attendance allowances totalling 143,400 euros in 2004.
Managing Director and Deputy Managing Director
Finnair Plc has a Managing Director, whose task is to manage the company's operations according to guidelines and instructions issued by the Board of Directors. The Board of Directors appoints and dismisses the Managing Director and decides on his/her terms of employment. The Board of Directors also appoints and dismisses the Deputy Managing Director. Finnair Plc's Managing Director is President & CEO Keijo Suila and its Deputy Managing Director is Henrik Arle, EVP Scheduled Passenger Traffic.
President & CEO Keijo Suila was paid a total of 560,104 euros in salary, bonuses and fringe benefits in 2004. EVP Henrik Arle was paid a total of 215,856 euros in salary, bonuses and fringe benefits in 2004.
The Managing Director and the Deputy Managing Director have the right to retire at the 60 years of age on a full pension of 60 per cent of pensionable salary. The Managing Director's and the Deputy Managing Director's contracts may be terminated with a period of notice of six months. In addition to salary for the period of notice, they are entitled to severance compensation equivalent to 12 months' salary, if the contract is terminated for reasons independent of them.
Group Management
The Finnair Group has a Group Management. Its Chairman is President & CEO Keijo Suila and its other members are Eero Ahola, Mauri Annala, Henrik Arle, Hannes Bjurström, Christer Haglund, Lasse Heinonen (as of 1 October 2004) Juha Kinnunen, Anssi Komulainen, Tero Palatsi, Petri Pentti (until 17 August 2004), Mika Perho, Tero Vauraste and Jarmo Vilenius
The Group Management meets 8-10 times a year and its tasks include handling of group-wide development projects as well as group-level principles and procedures. In addition, the Board of Management is informed about, among other things, the business plans of sector companies, financial performance as well as matters to be dealt with by Finnair Plc's Board of Directors, in the preparation of which it participates.
Matters relating to the remuneration scheme of members of the Group Management are considered in the Board of Directors' Remuneration and Appointments Committee. Decisions are made by the company's Board of Directors. Management incentive bonuses are determined annually based on the company's earnings per share, business-unit quality and process indicators as well as personal performance appraisals. The bonus can be equivalent at most to four months' basic salary.
The option scheme for Group key personnel has been replaced by a share-based incentive plan. The incentive plan is based on the Group's Earnings per Share and on the Group's Return on Capital Employed. The Board of Directors establishes the target levels each year.
Finnair Plc's Management Board
Management Board of Finnair Plc consists of the Group Management and three staff representatives.
Corporate governance of subsidiaries
The members of the boards of directors of the most significant subsidiaries are selected from individuals belonging to Finnair Group management as well as from representatives proposed by the personnel groups. The key tasks of the boards of directors of subsidiaries are strategy preparation, approving the operational plan and budget, and deciding on investments and commitments within the limits of instructions issued by the Board of Directors of Finnair Plc.
Auditors and monitoring
Auditors
The company has at least two and at most four auditors elected by the Annual General Meeting. The auditors' term of office is the company's financial year and the auditors' duties end at the conclusion of the Annual General Meeting following the meeting of their election. At least one of the auditors must be an authorised public accountant or an authorised accounting firm approved by the Central Chamber of Commerce. Finnair Plc's Annual General Meeting in 2004 elected two regular auditors, namely Authorised Accounting Firm PricewaterhouseCoopers Oy and APA Erkki Mäki-Ranta. Erkki Mäki-Ranta died 24 August 2004. The auditors of Finnair Group subsidiaries are mainly PricewaterhouseCoopers firm auditors or auditors employed by them.
In 2004 the Group's auditors were paid auditing fees totalling 167,000 euros. Finnair Plc also paid auditors 110,000 euros for services (taxation and IFRS consulting) unrelated to the statutory audit of the accounts.
Monitoring and reporting system
The principal task of the statutory audit is to verify that the financial statements give accurate and sufficient information about the Group's result and financial position for the financial year. The auditors report their findings to the Board of Directors once per year and submit an auditors' report to company's shareholders in connection with the annual financial statements.
The company has a risk management steering group, chaired by the President & CEO, whose task is to assess and safeguard the sufficiency, appropriateness and effectiveness of the Group's risk management, monitoring and management processes.
The Board of Directors of Finnair Plc has approved principles of internal monitoring, which are applied within the Group. Internal Auditing is responsible for fulfilling the monitoring and auditing obligation laid down in the Companies Act.
Internal auditing assists in verifying the integrity of transactions and the accuracy of information in internal and external accounting and to confirm that controls are exercised effectively, property is maintained and operations are conducted appropriately in accordance with the Group objectives. Internal auditing also participates in the auditing of Finnair Plc subsidiaries' accounts in collaboration with external auditing. The internal auditing priorities are determined in accordance with the Group's risk management strategy.
The fulfilment of financial targets is monitored by a system of Group-wide reporting. The reporting encompasses realised data and up-to-date forecasts for a rolling 12-month period. The accumulation of financial added value is monitored monthly in an internal reporting process. The Group's traffic performance is published in a monthly stock exchange bulletin.
Risks arising from operations in relating to property, interruption, accident and liability have been covered by appropriate insurances.
Governing provisions
Finnair Plc adheres to valid legislation, provisions issued under such legislation and the company's Articles of Association. Furthermore, in its activities Finnair Plc complies with the recommendations of the Helsinki Exchanges, the Central Chamber of Commerce and the Confederation of Finnish Industry and Employers on the administration and management of listed companies as well as insider rules.
Company insiders
According to the Securities Markets Act, Finnair Plc's permanent insiders include members of the Finnair Plc's Board of Directors, the Managing Director and his deputy, members of the Group Management and auditors, including the auditor of carrying chief responsibility for the firm of auditors. In addition, Finnair Plc's permanent insiders also include individuals working in positions specified by the Board of Directors.
The Board of Directors of Finnair Plc have approved Finnair Plc's insider guidelines, which contain guidelines for permanent and project-work insiders and specify the organisation and procedures of the company's insider controls. The company's insider guidelines have been distributed to all insiders.
The legal affairs department is responsible for the content of the insider guidelines. Compliance with the insider guidelines is monitored by the economics and finance department. The company operates a restriction on trading, which applies to insiders' trading in the company shares or in securities granting entitlement to shares for 14 days before the declaration of financial results.
Finnair Plc's insider register is maintained by Finnish Central Securities Depository Ltd. Up-to-date details of insiders' shareholdings can be viewed at Finnish Central Securities Depository Ltd's premises in Helsinki at the address Unioninkatu 32 B and on the company's website at the address www.finnair.com/investor.
Corporate Governance update
The Finnair Corporate Governance section is updated regularly and can be viewed on the company's website at the address www.finnair.com/investor. Finnair Plc's website is published in Finnish and English, as is the printed annual report. The electronic annual report and interim reports are also published in Swedish. |