Applicable statutes, guidelines and recommendations
Corporate Governance of Patria Oyj (a Finnish public limited liability company) is subject to the provisions of the Finnish Limited Liability Companies Act, the Auditing Act, and the Accounting Act and other legislation relevant to its operations. The Limited Liability Companies Act defines, for example, the company´s governing bodies, their roles and responsibilities, as well as their relation to each other. The Limited Liability Companies Act is also essential from the point of view of the shareholders´ rights by providing provisions on the rights associated with the shares and on the exercise of the rights, and it also contains the key principles of corporate law applied to corporate governance.
In addition, Patria follows other guidelines and recommendations concerning good corporate governance applicable to companies in which the Finnish state is the majority shareholder. While Patria is not a listed company it substantially follows the Finnish Corporate Governance Code, where applicable and to the extent the recommendations are suitable taking into account the company´s ownership structure and/or the special features of the company or its industry while maintaining a good corporate governance model.
Group legal structure
Patria is operationally divided into business units. Patria Group consists of the parent company, Patria Oyj, and its wholly owned subsidiaries. In addition to the wholly owned subsidiaries, Patria owns 61.8% of Millog Oy, 50% of Nammo AS (a Norwegian company) and 60% of Milrem LCM OÜ (an Estonian company). The statutory bodies of Patria Oyj – the General Meeting of Shareholders, the Board of Directors, and the President and CEO – are responsible for the company’s administration and operations.
The highest governing body is the General Meeting, in which the shareholders exercise their decision-making powers. The board of directors shall see to the administration of the company and the appropriate organisation of its operations, consisting of directors appointed by the General Meeting.
The Group’s operating activities are managed by the President and CEO, appointed by the Board of Directors and who shall see to the daily administration of the company in accordance with the instructions and orders given by the Board of Directors.The President and CEO is supported by the Board of Management. Each business unit has a management group of its own. The statutory boards of wholly owned Group companies other than the parent company are only responsible for the statutory minimum duties specified in the relevant legislation.
According to the Articles of Association, Patria Oyj shall have a Consultative Committee appointed by the General Meeting. The Board of Directors shall consult the Consultative Committee on matters that concern any major changes or expansion of operations or any other material changes to the company’s organisation or business operations, or which are otherwise of great importance to the industry that the company is engaged in, either in Finland or internationally.
The Consultative Committee consists of a chairman, a vice-chairman, and a maximum of ten other members. During the financial period under review, the committee had 11 members. In 2018, the Consultative Committee convened five times.
Composition of the Board of Directors and the election procedure
According to the Articles of Association as currently in force, the Board of Directors of Patria Oyj consists of a chairman and a minimum of three and a maximum of seven other members. During the current financial period, the Board had eight (8) members. The General Meeting of Shareholders elects the chairman, and the other Board members and decides on their remuneration. The Board members are elected for one year at a time, their terms of office ending at the close of the first Annual General Meeting held subsequent to their election. In 2018 the Board held twelve regular meetings and made decisions twice without convening for an actual meeting. The average attendance of Board members was 99%.
Principal duties of the Board of Directors and distribution of duties
The Board of Directors is responsible for the governance of Patria and the appropriate organisation of Patria´s operations in accordance with applicable legislation, the Articles of Association and any instructions issued by the General Meeting of Shareholders. In addition to its statutory duties, the Board’s principal duty is to make decisions on the Group’s strategic focus and objectives as well as principles of risk management, to monitor and steer the Group’s business operations, to ensure that the Group complies with legal provisions applicable to its operations and conducts business in a commercially sustainable manner, providing added value to its shareholders. The Board also makes decisions on the Group’s key operating principles, approves annually the Group’s financial targets and operational objectives, as well as its financial statement and any interim reports, and decides on material investments of the Group.
The Board of Directors ensures that the company has established the ethical and corporate values applied to its operation as well as theoperational principles and monitors compliance with these values and principles. The Board also approves the general setup of the Group’s organizational and operational structure. The duty of the Board of Directors is to promote the best interest of the company and all its shareholders. A directors does not represent the interests of the parties who have proposed his or her election as a director.
The Board of Directors has set up a Nomination and Compensation Committee as well as an Audit Committee to take charge of certain specific tasks of the Board of Directors.
The Nomination and Compensation Committee
The Nomination and Compensation Committee consists of three (3) members, all of whom are non-company and non-executive directors. The members have experience and skills in the areas of knowledge that fall within the scope of the Nomination and Compensation Committee duties as the Charter of the Committee. It prepares the Group’s and the management’s payroll structures as well as any bonus and incentive systems. It also approves key appointments and nominations.
The Audit Committee
The Audit Committee consists of three (3) members, all of whom are non-company and non-executive directors. The members have experience and skills in the areas of knowledge that fall within the scope of the Audit Committee duties as per the Charter of the Audit Committee. Its responsibility is to monitor e.g. implementation of the Group’s internal controls, risk management, financial reporting and it is responsible for supervising the Group´s ethics and compliance (including specifically anti-corruption and anti-bribery related actions) program and activities.
The President and CEO and the Group management
Patria Oyj’s President and CEO is responsible for managing the company’s and the Patria Group’s business activities and administration, in accordance with the provisions of the Finnish Limibed Liability Companies Act, other applicable legislation and any instructions and guidelines issued by the Board of Directors. The President and CEO is assisted in Group management by the Board of Management, which convenes monthly and which consists of Presidents of each Business Unit, Chief Financial Officer, General Counsel & Chief Compliance Officer, Chief Strategy Officer, Chief Communications Officer and Chief Human resources Officer. In addition, the Group management meets in other combinations as and when necessary for management purposes.
In Patria corporate responsibility related activities and reporting are steered by Patria’s Corporate Responsibility Steering Group. The Steering Group is coordinated by Patria’s Chief Communications Officer. Patria’s Ethics Officer participates in the steering groups meetings and supports the work of the Steering Group. The General Counsel and Chief Compliance Officer is responsible for the ethics and compliance program and related issues and activities and reports regularly to the Audit Committee on these matters.
Compensation and benefits
Information regarding compensation and benefits of the management is available in the attachment of the Financial Statement, see chapter 7 (Personnel expenses).
Monitoring and controls
The Board of Directors is responsible for ensuring that the monitoring and controls of accounts and funds management has been organized appropriately. The president and CEO is responsible for ensuring that the company’s accounting complies with legislation and that the funds management is reliably organized. Patria’s management is responsible for ensuring that the Group’s day-to-day operations comply with all applicable legal requirements and Board decisions, and that the Group´s risk management has been organized in an appropriate manner.
The Group’s division into business units increases efficiency and focus of management thereof and facilitates organization of efficient monitoring and control thereof. An operational reporting system has been set up for the Group’s financial monitoring and control. It produces versatile information on the Group’s financial standing and development on a monthly basis. The Group also has clearly defined decision-making authorizations related to investments.
Patria has an independent, outsourced Internal Audit function, which evaluates and contributes to ensuring the efficiency and feasibility of risk management and internal controls, the reliability of financial reporting, accounting and administration and the compliance of the operations. The Internal Auditors comply with the International Standards for the Professional Practice of Internal Auditing. Internal Audit reports on its activities and findings to the Audit Committee and Patria’s management. The Audit Committee confirms the internal audit plans annually.
The company’s external Auditor (elected by the general meeting) reports their observations at least once a year to the Board of Directors, the Audit Commitee and the Group’s management. . The auditors also submit a statutory auditors’ report to the company’s shareholders. Patria Oyj´s auditor is an approved auditor within the meaning of the Auditing Act.