Corporate Governance
The administration of YIT Corporation and the YIT Group complies with Finnish legislation, particularly the Finnish Companies Act, Securities Market Act and Accounting Act as well as the rules of NASDAQ OMX Helsinki Ltd and the company’s Articles of Association. In addition, YIT complies with the recommendations on the Corporate Governance of listed companies in Finland.
Contents
Annual General Meeting
Board of Directors
Committees of the Board of Directors
President and CEO
Group’s Management Board
Bonus and incentive schemes
Internal supervision
Risk management and internal audit
Insider administration
Audit
YIT Corporation’s Annual General Meeting is the Group’s highest decision-making body. The Annual General Meeting shall be held annually by the end of March. Extraordinary general meetings shall be held when the Board of Directors considers it necessary to do so or when required by legislation.
The Annual General Meeting shall take decisions on matters such as:
• approving the financial statements
• the payment of dividends
• discharging the members of the Board of Directors and the President from liability
• the election of the Chairman, Vice Chairman and the members of the Board of Directors and the remuneration to be paid to them
• the election of the auditor and the remuneration to be paid for the audit
• amendments to the Articles of Association
• decisions leading to changes in the share capital
• share buyback and transferring the company’s own shares
• the granting of share options
The notice of meeting shall be published in line with Articles of Association in a nation wide newspaper chosen by the Board of Directors and on the company’s Internet site. In addition to the matters that will be dealt with at the meeting, the notice shall also announce the names of the persons who have been nominated to seats on the Board of Directors. The condition is that these persons have the support of shareholders who hold at least a total of 10 per cent of the voting rights conferred by the company’s shares and that the nominees have given their consent to being elected. The name of the nominated auditor shall also be announced.
As a rule, the Annual General Meeting shall be opened by the Chairman of the Board. The other members of the Board shall attend insofar as they can. The President shall present the result of the financial year to the Annual General Meeting.
The Board of Directors is the Board of Directors of the parent company, YIT Corporation, and in that capacity shall be responsible for the administration and the proper organization of the operations of the entire YIT Group; in addition, it shall direct and oversee the operations of the YIT Group. It shall be the duty of the Board to promote the interests of all YIT Corporation shareholders and the YIT Group. In the company, the Board members shall not represent the parties that proposed them for membership on the Board.
According to the company’s Articles of Association, the Chairman, Vice Chairman and a minimum of three (3) and a maximum of five (5) members of the Board of Directors shall be elected at the Annual General Meeting. A person who is 68 years old or over cannot be elected to the Board of Directors.
The term of office of Board members shall begin at the Annual General Meeting which elected them and end at the conclusion of the next Annual General Meeting.
The Board of Directors shall ensure that accounting and asset management are organized appropriately; review and approve the company’s financial statements and consolidated financial statements for the financial period that has ended as well as, each year, the interim reports for the periods ending at the conclusion of March, June and September.
The Board of Directors shall meet on a regular basis. The dates of the Board meetings shall be set in advance for the entire term of office. In addition, the Board may hold telephone meetings as required.
The Board of Directors shall convene the company’s general meetings and draft proposals on the matters to be dealt with at the meetings.
The Board of Directors shall assess its activities annually. Board members shall submit their assessments of Board activities during the previous year to the Chairman of the Board in January at the latest. These assessments shall be taken into account when the proposal for the composition of the new Board is prepared.
When proposing Board members, the recommendations on the Corporate Governance of listed companies shall be taken into consideration.
The Board members and the remuneration paid to them are presented in the Annual Report and on the Internet site. Up-to-date information on the shareholdings of Board members and other insiders subject to the disclosure requirement can be read on the company’s Internet site (www.yitgroup.com)> Insiders' ownerships in YIT).
The Board of Directors has drafted written standing orders for its activities.
The following matters in particular are to be reviewed and decided on by the Board of Directors:
• the election of the President and his deputy and deciding on their salary and other terms of employment
• the Group’s strategy and objectives
• budgets and operating plans and overseeing their realization
• processing and approving the financial statement, report of the Board of Directors and Interim Reports
• specifying the dividends policy and making a proposal to the Annual General Meeting on the dividends to be paid for the year
• significant acquisitions and other investments
• the Group’s operational structure
• ensuring the functionality of management systems
• principles of risk management
• ratifying the Group’s values
Committees of the Board of Directors
The Board of Directors has an Audit Committee and a Nomination and Rewards Committee. Both of the committees have three members, who shall be elected by the Board of Directors from amongst its members annually at the first Board meeting following the Annual General Meeting. The Board of Directors shall elect one of the members in both committees to be the Chairman of the committee. The members of the Audit Committee must not be dependent on the company, as required in the Corporate Governance recommendations. The company’s President and CEO may not be a member of either of the committees and a person belonging to other management may not be a member of the Nomination and Rewards Committee.
It shall be the task of the Audit Committee to assist the Board of Directors in the supervision of the YIT Group’s reporting and accounting processes, including internal supervision, risk management, internal auditing and supervising and directing the audit.
The Audit Committee shall meet four times a year: before the approval of the financial statements and interim financial statements. When necessary, the Audit Committee may meet more frequently.
The Board of Directors has ratified written standing orders for the Audit Committee.
It shall be the task of the Nomination and Rewards Committee to assist the Board of Directors in the nomination and rewarding of key personnel within the YIT Group, as well as in other issues related to the development of HR policies. The committee will prepare proposals for the General Meeting on the appointment of members for the Board of Director as well as on their rewarding.
The Nomination and Rewards Committee shall meet invited by chairman when considered necessary.
The Board of Directors has ratified written standing orders for the Nomination and Rewards Committee.
The President and CEO shall attend to the day-to-day administration of the company in accordance with the instructions and regulations laid down by the Board of Directors. He shall also ensure that the company’s accounting is lawful and asset management is organized reliably. The President and CEO of the parent company shall serve as the Chairman of the Group’s Management Board and as the Chairman of the Boards of the parent companies of the Group’s main business segments.
The Board of Directors shall decide on the President and CEO’s salary, remuneration and other terms of employment. The remuneration of the President and CEO and the terms of his employment are presented in the Annual Report and on the Internet site.
The Group’s Management Board, which shall meet twice a month as a rule, assists the President and CEO with operational planning and management and prepares matters that are to be dealt with by the parent company’s Board of Directors. Among other duties, the Management Board shall formulate and coordinate the Group’s strategic and annual planning, supervise the realization of plans and reporting, and prepare major investments and acquisitions. Its central tasks shall include the development of intra-Group activities, the corporate culture and the corporate image.
The YIT Group’s Management Board comprises:
• President and CEO (Chairman)
• Deputy to the Group's President and CEO (Vice Chairman)
• CFO of the Group
• Heads of the business segments
• Senior Vice President, Human Resources
In addition to the above mentioned persons, the Group's Extended Management Board includes the Senior Vice President, Corporate Communications and Business Development and the Senior Vice President, Investor Relations. The Extended Management Board convenes four times a year, focusing particularly on the Group's quarterly reporting.
The majority of the Group’s salaried employees are covered by a bonus system. The Board of Directors shall annually confirm the bonus rules according to which bonuses are paid. The amount of the bonuses that are paid shall depend not only on the financial results of the entire Group and the business segment and unit of the employee in question, but also significantly on the realization of personal key results. Each salaried employee shall agree on his key results during a performance evaluation discussion with his supervisor.
The Group’s share option programmes are presented in the Annual Report and on the Internet site, along with the share and option holdings of Board members, the President and CEO and the members of the Management Board.
The Group’s business operations are divided into main business segments. The heads of the business segments shall report to YIT Corporation's President and CEO. The reporting and supervision of the business segments are based on budgets drafted every six months and on monthly performance reporting. Each business segment shall hold an annual follow-up meeting led by the YIT Corporation's President and CEO; present at these meetings shall be the management of the business segment, the management of the business units and other key employees of the business segment.
As a rule, the Management Boards of the parent companies of the business segments shall meet on a monthly basis. The Head of the business segment shall serve as the Chairman. The members of the Boards of Directors of the business segments' parent companies shall be YIT Corporation's President and CEO and the CFO as well as the President and Financial Manager of the company in question. The Management Boards and the Boards of Directors of the business segments shall deal with matters such as the business segment’s development, strategic and annual planning, the supervision of business operations and performance, investments, acquisitions and internal organization within the business segment.
In addition to the Management Boards of the business segments, each of the divisions and country groups within the business segments shall have their own Management Boards. Their central task shall be to deal with matters related to business planning, the monitoring of performance and the development of operations. The Management Boards, which shall meet monthly, also include personnel representatives.
The control and supervision of the YIT Group’s business operations shall be performed using the management system presented above. The company has the necessary reporting systems for monitoring business operations and supervising asset management.
The Group’s Accounting Department shall provide instructions on the drafting of the financial statements and interim financial statements as well as prepare the consolidated financial statements. The parent company’s Finance Department shall attend to the YIT Group’s asset management and funding on a centralized basis and shall be responsible for the management of interest and exchange rate risks. The Financial Managers of the business segments shall monitor that reporting within the business segments is carried out in line with the instructions issued by Group management. The Group’s legal affairs department shall provide guidelines for and oversee the agreements made by the company and shall both guide and supervise the Group’s personnel policy.
Risk management and internal audit
The Board of Directors shall approve the risk management policy and objectives as well as guide and monitor the planning and implementation of risk management.
Group management shall hold the highest operational responsibility for the risk management policy. Group management shall be responsible for organization and the planning, development, coordination and monitoring of the risk management strategy as well as its inculcation and related communications in the entire Group. Group management shall report to the Board of Directors.
The management of the business segments shall identify and assess the major risks of their respective business segments and draw up contingency plans for the risks. The risk responsibilities and obligations shall be centralized in the business segments. The management of the business segments shall report to Group management.
YIT’s risk management is an integral part of the Group’s management, monitoring and reporting systems. Regular reporting and monitoring shall be performed both at the Group and division levels. The identification of risks and preparations for them shall be primarily carried out in the units, divisions and business segments.
YIT’s risk management policy is defined as follows:
• The aim is to identify the major risk factors, taking the special characteristics of YIT’s business operations and environment into consideration, and optimally manage them so that the company achieves its strategic and financial objectives.
• The aim of the integrated risk management policy is to take all of the company’s major risk factors into consideration so that the company’s total risk exposure is optimally managed in accordance with the strategic and financial objectives.
Integrated risk management hinges on the management of the company’s total risk exposure from the entire Group’s perspective, and not just the management of individual risk factors.
YIT has specified the major risk factors and their management from the entire Group’s perspective. Risk factors generally concern the strategy, the management and monitoring system, Corporate Governance, capital management, acquisitions and the integration of the acquirees, the availability of competent employees, economic trends, project management and large projects.
The Group's parent company has an internal auditor whose tasks primarily focus on auditing business operations and ensuring the consistency of operating principles. For the monitoring of business operations and asset management, the company has the aforementioned internal monitoring reporting systems and the Group’s auditor assesses the functionality of this internal monitoring system as part of his supervision of the lawfulness of operations.
The YIT Group uses Guidelines for Insiders that consists of the Guidelines for Insiders by NASDAQ OMX Helsinki Ltd for listed companies as well as of the specifications concerning YIT Group.
The members of the parent company’s Board of Directors, the President and CEO, the deputy to the Group CEO, the secretary to the Board of Directors and the Chief Auditor are insiders subject to the disclosure requirement, as are the members and secretary of the Group’s Extended Management Board. Other permanent insiders include, but are not limited to, persons responsible for administration, HR matters, legal services, accounting, finance as well as logistics and procurements at the Group level and the secretaries of the senior management. In addition, the permanent insiders include management and key personnel of Group Services that are specifically chosen as permanent insiders by the Board of Directors as well as the secretary of President and CEO of YIT Corporation, the secretaries of Executive Vice President and CFO of YIT Corporation, the members and secretaries of the Management Boards and Boards of Directors of the Group’s main business segments as well as the secretaries of the Presidents of the business segments and their Financial Managers.
The Group has a total of about 50 permanent insiders.
The YIT Group’s Guidelines for Insiders and up-to-date information on the share and option ownership of insiders subject to the disclosure requirement can be read on the company’s Internet site.
Audit
According to the Articles of Association, the company shall have one auditor that must be a firm of auditors approved by the Central Chamber of Commerce. The firm of auditors shall announce who holds chief responsibility for carrying out the audit. The auditor’s term of office is the financial period at the time of election and ends at the conclusion of the next Annual General Meeting.
In accordance with the decision taken by the Annual General Meeting, the auditor shall be remunerated in accordance with the amount invoiced. The remuneration paid to the auditor is presented in the Annual Report and on the Internet site.
Updated October 30, 2008
InvestorRelations@yit.fi
