Tekla's Corporate Governance Statement 2010
The above Corporate Governance Statement 2010 (publ. on March 11, 2011) will not be updated. The texts below, however, will be updated accordingly if changes occur.
Corporate Governance in Tekla Corporation complies with the provisions of the Finnish Companies Act, Tekla’s Articles of Association and the Finnish Corporate Governance Code 2010 issued by the Securities Market Association.
Tekla departs from the recommendation 9, because the Board has no female members. Tekla has a relatively small board that gets renewed gradually. The company’s needs form the basis when new members are sought. Practical experience of construction was now considered important, as construction is a significant area of growth for Tekla, and experience on this specific area was seen necessary. Potential candidates were evaluated from this perspective, and Saku Sipola was proposed as a new member. The Annual General Meeting 2011 elected Mr. Sipola to the Board. (updated on April 7, 2011)
The Finnish Corporate Governance Code is publicly available e.g. on the Securities Market Association’s internet site at www.cgfinland.fi.
Governance and operation of Tekla are managed by the General Meeting, the Board of Directors and the President and CEO. The Board of Directors supervises the company’s profit development, governance and organization on behalf of shareholders. Tekla’s President and CEO is responsible for operative activity on the corporate level, and he is assisted by the other management. (“Management” hereafter refers to the Tekla Management Team.)
Group structure
Tekla Group consists of the parent company Tekla Oyj (in English Tekla Corporation) and the foreign subsidiaries. The group’s business is taken care of by two business areas: Building & Construction and Infra & Energy. The subsidiaries are mainly responsible for sales and customer support of products of Building & Construction in their respective areas. Product development takes place almost entirely in Finland.
- Building & Construction business area (B&C) develops and markets the Tekla Structures software product for information model-based design of steel, concrete and other structures as well as the management of fabrication and construction.
- Infra & Energy business area (I&E) focuses on the development and sales of model-based software solutions that support customers’ core processes. Its key customer industries are energy distribution, public administration, as well as civil engineering and water.
General Meeting
The General Meeting is the highest decision-making body of the company. The Board shall summon an Annual General Meeting within six months of the end of the financial period.
At the Annual General Meeting the following shall be
decided:
- approval of the financial statements and consolidated group accounts,
- any measures called for by the profit or loss reported in the approved balance sheet,
- granting of discharge from liability to the members of the Board and the Chief Executive Officer,
- the number of the members of the Board,
- remunerations payable to the members of the Board and to the auditor
and elected:
- the members of the Board and the auditor
as well as dealt with:
- any other items listed in the invitation to the meeting.
See further Shareholder meetings
Board of Directors
Tekla’s governance and proper organization of operation is the responsibility of the Board of Directors, which according to the Articles of Association consists of a minimum of three and maximum of five actual members and one deputy member.
The members of the Board are elected by the General Meeting. Additionally, a representative of the personnel plus a personal deputy may also be nominated to the Board. The term of the members of the Board ends when the first Annual General Meeting following the election ends. The Board elects a Chair and Vice Chair from among its members.
It is the duty of the Board to
- decide on the company’s strategy
- ratify the company’s action plan and budget
- review and adopt interim reports, financial statements and review of the Board
- decide on strategically or financially significant individual investments, acquisitions or sales and contingent liabilities
- accept the company’s financing policy
- ratify group-level risk management and reporting procedures
- decide on the company’s compensation and incentive system
- decide on the company’s structure and organization
- take responsibility of the company’s dividend policy and development of shareholder value
- appoint the company’s President and decide on his/her employment benefits
- decide on appointing a deputy for the President
- take responsibility for the duties of the audit committee
- take responsibility for other tasks imposed on the Board by the Companies Act or elsewhere.
The Annual General Meeting 2011 re-elected the following Board members: Olli-Pekka Laine (Chair), Ari Kohonen, Erkki Pehu-Lehtonen (Vice Chair) and Reijo Sulonen. As a new member was elected Saku Sipola. As Deputy member of the Board was re-elected Timo Keinänen. (updated on April 7, 2011)
The Extra General Meeting held on November 28, 2011 elected Rajat Bahri, Trimble Navigation Limited's CFO as a member of the Board replacing Ari Kohonen. (updated on Nov, 29, 2011)
Juha Kajanen is the representative of the personnel (and Kirsi Hakkila his personal deputy).
Of the Board members Mr Laine, Mr Pehu-Lehtonen, Mr Sipola and Mr Sulonen are independent of the company and of significant shareholders. (updated on April 7, 2011, rechecked on November 29, 2011 after the EGM)
In 2010 the Board of Tekla Corporation held 11 meetings and the average attendance was 95 percent.
In 2010 the board members were paid as follows:
- Heikki Marttinen: 33,000 euros
- Olli-Pekka Laine: 30,500 euros
- Erkki Pehu-Lehtonen: 24,500 euros and
- Reijo Sulonen: 24,000 euros.
Travel expenses of the Board members were reimbursed according to Tekla’s travel policy. The members of the Board, who are employed by the Tekla Group, were not paid any fees for their board work.
The members of the Board had no other benefits, nor were they paid any fees in the form of Tekla shares or share-related rights during the reporting period.
According to the Annual General Meeting 2011 the fees for the members of Tekla Board were kept the same, i.e. for the chairman 3,000 euros per month, the vice chairman 2,500 euros per month and the members 2,000 euros per month. In addition, their travel expenses were reimbursed according to Tekla’s travel policy. The members of the Board, who are employed by the Tekla Group, were not paid any fees for their board work. (updated on April 7, 2011)
More detailed about the Board members: personnel information and ownership information
Board committees
Being rather small, the Board works effectively in close co-operation and meets regularly, whereby it has not been considered necessary to establish any separate committees. Thus the Board takes care of the duties of the audit committee.
President and CEO
The President and CEO manages the company’s operative activity according to the instructions and orders given by the Board. The President manages and controls the operation of Tekla and its business areas, prepares the issues to be discussed by the Board and is responsible for their execution.
M.Sc.(Eng.), Bachelor of Econ. Ari Kohonen has been Tekla Corporation’s President and CEO as of January 1, 2004. Ari Kohonen can retire at the age of 60. Tekla will pay a predetermined contribution to the insurance company for the duration of Mr. Kohonen’s employment. This will result in notional pension for him until he comes within the sphere of the TyEL (The Employees Pensions Act) pension system. Mr Kohonen’s period of notice of is 6 months. Should Tekla terminate his employment, he is entitled to a severance pay corresponding to 12 month’s salary.
In 2010 Ari Kohonen was paid a total of 208,000 euros in remuneration (including fringe benefits). The CEO had no other benefits, nor was he paid any fees in the form of Tekla shares or share-related rights.
Management Team
The Management Team assists the President and CEO in e.g. preparing the company’s strategy, operating principles and other issues shared by the business areas and the Group.
The Tekla Management Team consists of the President and CEO and the Directors of the business areas and key support functions. The Management Team meets regularly, at least once a month. In 2010 the Management Team was not paid any fees in the form of Tekla shares or share-related rights.
More detailed about the Tekla Management Team members: personnel information and ownership information
Compensation
The company has an incentive system that covers all employees. Its level is decided by the Board of Directors. Compensation is linked to the operational and, in particular, financial performance during the previous year. Tekla has no share option programs.
More information in the remuneration statement.
Main features of internal control and risk management associated with the financial reporting process
Tekla’s Board of Directors is responsible for ensuring that the company’s internal control and risk management are duly and effectively organized. The Board is also responsible for ensuring that the internal control of the accounting and financial management functions is arranged in an appropriate manner. In addition, the Board is responsible for the control of the financial reporting process. It is the responsibility of the financial management to inform members of the management of their observations.
Internal control associated with the financial reporting process aims to ensure that Tekla Group’s business operations are profitable and that decisions are based on correct and reliable information and sufficient identification of business risks.
Tekla’s two business areas and the Group’s support units prepare their own budgets which are approved by the Board of Directors. After each quarter, the business areas and the Group-level support units update their forecasts for the rest of the year as necessary.
The Group’s financial management reports on the operational result to the Board and the Management Team monthly. Reporting and the associated analyses and benchmarks are an essential part of steering and control carried out with the help of financial reporting. In consideration of the quality and extent of Tekla’s business operations, the key risk areas in financial reporting are associated with revenue recognition and trade receivables.
The Group’s financial administration regularly monitors the reporting of the units, taking action in case of any deviations and, if necessary, conducting its own internal control surveys or having them carried out by external experts. In defining the extent and content of the external audit, the fact that the company has no internal control organization has also been taken into account.
The Group’s financial administration function is responsible for specifying uniform accounting and reporting principles and providing guidelines on them, continuous development of the reporting system and training of the financial administration organization of the units. The Group’s financial management is centrally in charge of the interpretation and application of the accounting standards (IFRS).
The Group’s financial administration is centrally in charge of financing and currency hedging.
A more detailed description of financing risks is available in the notes to the financial statements (Note 29).
Audit
It is the purpose of the statutory audit to verify that the financial statements give true and fair information on the company’s result and financial position in the financial period. The company’s auditor gives a statutory auditor’s report to the shareholders in connection with the company’s financial statements. Reports on audits carried out during the financial period are given to the Board. The auditor meets with the Board at least once a year. The financial management and the auditors meet at least four times a year.
The auditor is elected by the Annual General Meeting. The term of the auditor is the financial period under way at the time of selection, and it ends when the next Annual General Meeting after the selection ends. The AGM of 2011 re-elected as Tekla’s auditor Ernst & Young Oy, with Erkka Talvinko, A.P.A, as the responsible auditor.(updated on April 7, 2011)
In 2010 the auditor of the parent company (and to auditors of subsidiaries) were paid a total of 155,373 euros. The sum includes 71,932 euros for audit and 83,441 euros for IFRS, taxation and other consulting.
Risk management
Possible risks and uncertainty factors associated with Tekla’s business are mainly related to the market and competition situation and the general economic situation. A majority of Tekla’s net sales comprises of sales of licenses entitling to use software products. Fluctuation in their demand can be rapid and significant. The sales of Tekla software are geographically distributed. Also individual customers do not account for a significant share of net sales, and therefore these risks are not essential.
The purpose of Tekla’s risk management is to detect, analyze and aim to control possible threats and risks connected with operations. Group-level policies and guidelines define the principles and key content of risk management with regard to certain risks. Risks are monitored, coordinated and managed on the group level, but each unit is responsible for managing risks of its own activity. Insurance policies covering the Group as a whole are also a part of damage risk management.
Central focus areas of Tekla’s risk management
- The business risks of the company are limited by the active and interactive work of the Board and the Management Team in developing strategies.
- Personnel-related risks, which are typical of the IT industry, are addressed through competence management. This ensures that the company develops the areas of know-how that are essential to the future of the business.
- Product and service-related risks are minimized through contracts and limited authorizations to sign, as well as by auditing.
- The central trademarks of the company are registered.
- Patent protection is used for technical solutions.
- Procedures to avoid breaching the intellectual property rights of others have been composed.
- Unauthorized and harmful use of the company´s network is prevented, and data security risks are minimized by the best and most recent data security technology in the market.
- Currency risks arising from the company´s international business operations are managed by protecting the net flow of payments in US-dollars.
- Investing the liquid assets of the company is done according to principles decided by the Board in certificates of deposit, bonds, and similar securities where the risks are small.
- Due to the company´s rather large amounts of liquid assets, the liquidity risk is very low.
- Risks related to sales and other unpaid debts are minimized with short terms of payment and efficient methods of collecting.
- Functional and economic risks are also controlled by internal quality auditioning in the Group.
- The management of the company is insured, and ensured with an efficient substitute system.
- The property of the company is protected with due insurances.
Insider management
Tekla complies with the Guidelines for Insiders issued by NASDAQ OMX Helsinki Ltd, supplemented by the company’s own guidelines. Insiders are not allowed to deal with the company’s shares for one month before the publication of interim reports and financial statements (so called closed window). A Tekla insider may also not engage in short-term trading in Tekla securities, in other words trading in securities within three months is prohibited.
Tekla’s public insiders include members and deputy member of the Board, President and CEO, Executive Vice Presidents, members of the Tekla Management Team and the auditors. The permanent and project-specific insiders belong to Tekla’s company specific insiders.
Tekla’s all insider registers are kept in the company headquarters in Espoo, Finland. The assistant to Tekla’s President and CEO is responsible for the insider management.
- The list of Tekla’s public insiders is available here
The list of public insiders is updated continuously without undue delay. The list of public insiders is available on the company’s web site at least 12 months.