Popular placesCorporate Governance Statement
Comptel has issued a new form of Corporate Governance Statement according to the Finnish Corporate Governance Code. The separate statement has been published in the connection with the financial statements and the report by the board of directors on 1 March 2010.
Corporate Governance Statement 2009 (pdf)
CORPORATE GOVERNANCE
General Meeting
Board of Directors
President and CEO
Corporate Executives
Remuneration
Internal Control, Risk Management and Internal Audit
Insider Administration
Auditing
Comptel Corporation is a Finnish public limited company in which the duties and responsibilities of the executive bodies are defined according to the Finnish law. The international Comptel Group comprises the parent company, Comptel, and its subsidiaries. The parent company is domiciled in Helsinki.
Comptel's decision-making and administration comply with the Finnish Limited Liability Companies Act, other regulations concerning publicly traded companies, Comptel Corporation's Articles of Association, and the rules of NASDAQ OMX Helsinki Ltd.
The company complies with the Finnish Corporate Governance Code issued by the Securities Market Association in 2008 with the exception that there are no female members in the Board of Directors. The Annual General Meeting held 22 March 2010 did not elect female members to the Board of Directors. There exists no nomination committee within the Board of Directors in Comptel Corporation. Therefore the composition of the Board of Directors is based on the measures of the shareholders and the Board of Directors does not have a role in the election of the Board Members. The Corporate Governance Code is available in full at http://www.cgfinland.fi/index.php?lang=en.
The highest decision-making bodies in Comptel Corporation are shareholders at the General Meeting, the Board of Directors, and the President and CEO of the Group.
The highest decision-making power in Comptel Corporation is vested in the General Meeting. In the General Meeting, shareholders decide on the adoption of the financial statements, the use of the profit shown in the balance sheet, the discharge from liability of the members of the Board of Directors as well as the President and CEO, the number of Board members and the remuneration paid to the Board members and auditors. The General Meeting elects the Board members and, whenever necessary, the auditor and deputy auditors or the public accounting firm. In addition, any other business mentioned in the notice of the meeting is dealt with during the General Meeting.
The General Meeting of Comptel Corporation is summoned by the company's Board of Directors. According to the company's Articles of Association, the Annual General Meeting must be held each year before the end of June, on a date set by the Board.
Duties and responsibilities
The duties and responsibilities of the Board of Directors are primarily defined by the Finnish Limited Liability Companies Act and the Articles of Association of Comptel Corporation. The Board of Directors controls and supervises the operational management of the company. The Board of Directors is responsible for ensuring that the company's accounting and financial management are properly organised.
The Board of Directors has confirmed the written charter that specifies the Board's duties, business to be handled, meeting practices and the decision-making processes. According to the charter, the Board of Directors handles and decides on all matters that are financially, commercially or fundamentally significant to the Group's operations. The Board of Directors confirms the Group's strategy, budget, corporate structure, major corporate arrangements and investments. Furthermore, the Board of Directors approves and confirms the principles of risk management, appoints and discharges the President and CEO, and decides on the terms and conditions of employment for the President and CEO.
As a general rule, the Board of Directors convenes once a month and additionally whenever necessary. In 2009 the Board of Directors convened 11 times (2008: 16). The average attendance of the members was 96 per cent (99).
The Board of Directors regularly evaluates its operations and working practices. The Board also carries out a self-assessment in relation to its operations and working practices once a year.
Election of Board members
As specified in the Articles of Association, the General Meeting elects a minimum of three and a maximum of six Board members. The Board members are elected for one year at a time so that the term of office for all Board members ends at the close of the following year's Annual General Meeting. The Board of Directors elects a chairman and a vice chairman from among its members.
Members in the Board of Directors
Mr Sami Ahonen, Head of Legal Affairs at the Comptel Corporation, serves as the secretary for the Board of Directors.
Independence of Board members
All members of the Board of Directors are independent of the company and the company's significant shareholders.
Board Committees
There are two permanent committees within the Board of Directors: the Audit Committee and the Compensation Committee, both of which consist of three Board members. The Board of Directors elects the chairmen and the members of the committees from among its members for one year at a time. The Board of Directors has confirmed a written charter for the committees that lay down their key duties and operating policies.
The Audit Committee is the Board's preparatory body which focuses on matters relating to the company's financial reporting and control. The Committee makes sure that the company's financial reporting, accounting and financial management as well as external and internal audit and risk management systems are properly organised. The Committee is also responsible for keeping in contact with the auditors and assessing the auditors' performance.
In 2009, the Audit Committee convened four times (2008: four). The average attendance of the members was 92 per cent (92). In its meeting held after the Annual General Meeting 2010, the Board of Directors elected Mr Juhani Lassila as the chairman and Mr Petteri Walldén and Mr Henri Österlund as members of the Audit Committee.
The Compensation Committee is the Board's preparatory body which assists the Board of Directors in matters relating to the terms and conditions of employment and remuneration for the senior management and prepares and develops the company's compensation systems.
In 2009, the Compensation Committee convened once (2008: four times). The average attendance of the members was 100 per cent (100). In its meeting held after the Annual General Meeting 2010, the Board of Directors elected Mr Olli Riikkala as the chairman and Mr Timo Kotilainen and Mr Hannu Vaajoensuu as members of the Compensation Committee.
In addition, whenever needed, the Board may also set temporary working committees to prepare subjects for the Board. In 2009, there did not convene any working committee of the Board.
The President and CEO is appointed by the Board of Directors. The Board of Directors decides on the terms and conditions of President and CEO's employment, including the salary, other compensations and fringe benefits that are defined in the CEO's contract of employment. The President and CEO is responsible for ensuring that the objectives, strategies, future plans, outlines and goals set by the Board of Directors are implemented and achieved by the Comptel Group. The President and CEO prepares the issues to be decided by the Board of Directors and executes the decisions made.
Comptel Corporation's President and CEO is Mr Sami Erviö. The Deputy CEO is Mr Simo Sääskilahti, Senior Vice President.
In addition to the statutory pension cover, additional pension arrangements allow the President and CEO to retire at the age of 62. The President and CEO's period of notice is six months if dismissed by the company and two months if the President and CEO resigns. In a case of termination of the employment relationship by the company, the compensation payable on the basis of termination comprises an amount equal to a salary of 15 months less the salary for the period of notice.
The duty of the Corporate Executives is to assist the President and CEO. Corporate Executives include the directors of the business units and the units supporting business operations.
In 2009, the Corporate Executives convened six times (11).
Comptel's management of business operations is based on the operations of the profit and cost units. Comptel Corporation's subsidiaries and affiliated companies operate within the respective business areas. The Corporate Executives are responsible for integrating the activities of the Group and its parts into an operating plan associated with the annual budget to implement the Group's strategies.
During the year, the results of the operations relative to the budget and operating plan are reported monthly, and the causes of any deviations as well as the measures taken to correct them are properly documented.
Board of Directors
Annual and meeting fees paid to Board members:
Board of Directors at 31 December 2009
| 2009 | 2008 | |
| Kotilainen Timo | 34,000 | 35,000 |
| Lassila Juhani | 34,000 | 35,000 |
| Riikkala Olli | 60,000 | 66,000 |
| Vaajoensuu Hannu | 41,000 | 46,000 |
| Walldén Petteri | 25,000 | - |
| Former members | ||
| Mustaniemi Matti | 8,000 | 35,000 |
| Hintikka Juhani | - | 7,000 |
| Total, euros | 202,000 | 224,000 |
The Annual General Meeting confirms the compensation to be paid to the members of the Board of Directors. The Annual General Meeting 2010 decided to keep the fees unchanged as follows:
- Chairman 53,000 euros per year
- Vice chairman 33,000 euros per year
- Members 26,000 euros per year
- Attendance allowance 500 euros per meeting; and
- for committee meetings, 600 euros per meeting for the chairman and 500 euros per meeting for the members
Out of the annual compensation paid to the Board members, 40 per cent of the total gross compensation amount is used to purchase Comptel's shares in public trading through NASDAQ OMX Helsinki Ltd or alternatively by using the own shares held by the company. The shares will be disposed as soon as possible after the Annual General Meeting.
As part of the annual compensation, Comptel Corporation disposed 84,447 own shares to the Board members on 26 March 2010.
Board members are not belonging to Comptel's share-based incentive plan or share option schemes.
CEO and Corporate Executives
The salary and fees of President and CEO for 2009 totalled 496,302 euros (2008: 379,000).
The salaries and fees of the other members of Corporate Executives for 2009 totalled 1,965,370 euros (2008: 1,042,00).
The current remuneration of CEO and Corporate Executives consists of a fixed monthly salary, a bonus scheme and a share-based incentive plan. Comptel's Board of Directors makes decisions on the salaries and other financial benefits of the CEO and the Corporate Executives, following the one-over-one principle.
Potential profits from the bonus scheme depend on achieving the Group targets which are the development of net sales, operating profit, cash flow and earnings per share. The leaders of business areas also have order intake as a target. The targets are set and the reaching of them are considered biannual.
The Board of Directors approved a new share-based incentive plan for the Group's key personnel in January 2009. The aim of the plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the company, to commit the key personnel to the company, and to offer them a competitive reward plan based on holding the company shares.
The plan includes three earning periods, calendar years 2009, 2010 and 2011. The Board of Directors will decide on the earnings criteria for each earning period at the beginning of each earning period. A two-year restriction period will follow each earning period, during which shares cannot be transferred. Should a key person's employment or service end during the restriction period, he/she must gratuitously return the shares paid as reward to the Company.
The reward from the plan for the earning period 2009 was based on the continuance of employment or service of a key person and on the Comptel Group's operating profit margin. The reward is paid partly as the company's shares and partly in cash. The proportion to be paid in cash will cover taxes and tax-related costs arising from the reward.
There were 13 key persons in the plan at the end of 2009. The President and CEO of the company belongs to the incentive plan provided that he holds at least 150,000 Comptel Corporation shares until 31 December 2012. The restriction periods of the rewards to be potentially paid to the President and CEO, on the basis of continuance of his service, will end in 2012 and 2013. A maximum amount in denomination of euro has been determined for the rewards of the President and CEO.
The President and CEO or the other Corporate Executives are not belonging to the share option scheme 2009 which is directed to mid-managers and other key personnel.
INTERNAL CONTROL, RISK MANAGEMENT AND INTERNAL AUDIT
Internal control is an essential part of Comptel's corporate governance. Comptel's Board of Directors, management and other personnel take part in internal control processes.
The objective of Comptel's internal control is to ensure that:
- the company's operations are efficient and profitable
- financial and operational information is reliable
- the entire Group complies with the regulations and policies.
Internal control is not a separate process, but it is integrated into the company's day-to-day operations. Internal control covers all of Comptel processes, policies and organisational structures that help to ensure that the company is achieving its objectives, that the business conduct is ethical, that the assets are managed responsibly and that the financial reporting is organised properly. It includes for example, reporting, approval practices and informattion on the compliance with the policies.
Risk management is an important part of Comptel's internal control. The two are integrated on the process level. Risk management refers to a systematic process to identify, evaluate and control risks due to external factors as well as risks arising from the Group's own activity.
Comptel's risk management system aims at minimising the detrimental impacts of risks on the Group's profit. The Board of Directors has ratified the principles of risk management defining the risk management objectives and general practices, and also the tasks and responsibilities connected with risk management.
The Chief Financial Officer is in charge of coordinating risk management within the Group. As a general rule, the business units are responsible for identification and management of any and all risks that have an impact on their operations. Risk evaluation and management are an important part of the Group's annual business planning and strategy process, budgeting, as well as the preparatory and the decision-making processes connected with commercial offers, agreements and investments and other operative activities.
The risk management system is based on monthly reports that are used to track the development of financial position, net sales, profitability, orders, deliveries, trade receivables, order backlog and order flow, which in turn enable monitoring the development of the entire Group's results. The internal reporting is carried out by business units during the meetings of the Corporate Executives and in the audits of the Group's support functions.
Business risks
In its normal business, Comptel is subjected mostly to strategic, financing and operative risks. Strategic risks are considered the most significant. Strategic risks are further divided into market risks and risks related to Comptel's business strategy.
Below is a description of the most important factors outside the Group or generated by its operation, which may be of significance to Comptel's business, operating result and share price in the future.
- The recovery of Operations Support System (OSS) market may be delayed in Europe and in the North America, and the demand can weaken also in other regions.
- Comptel develops dynamic end-to-end solutions for leading operators in the telecom field globally. This requires Comptel to understand correctly the trends taking place in its business environment and the needs of its customers and resellers by each region. Failure to identify market conditions, address customers' needs and develop its products in a timely way may significantly undermine Comptel's business and profitability.
- Competition in the OSS market is keen. The sector is undergoing consolidation between actors, which is reflected in the duration and pricing of agreements. If Comptel does not manage to adapt its operations and address the changes taking place in its competition environment, the market development may greatly impair company's business and operating result.
- The Middle East, Africa and Asia are increasingly important market areas for Comptel. The company is operating in several countries where the political and social situation is unstable. Deterioration of the situation in these areas may hinder Comptel's business and undermine its profitability. The value of a single delivery project can well be several million euros. Thus a single delivery project or customer may involve a significant risk.
- Comptel operates globally so it is exposed to risks arising from different currency positions. Exchange rate changes between the Euro, which is the company's reporting currency, and the US Dollar, UK Pound Sterling and Norwegian Krone may affect the company's net sales, expenses and net profit.
- The application submitted by Comptel to prevent double taxation is still pending with the Ministry of Finance in Finland. The company believes the treatment of its withholding taxation will be changed also concerning the countries where the issue is still unsolved.
Comptel has valid and proper insurance coverage. The required amount of coverage is annually defined.
Internal audit is carried out according to the annual plan in which the auditing targets are defined. The actual audit is executed in chosen locations based on a prepared auditing plan. The audit focuses on the assessment of business operations, the implementation and realisation of financial and administrative processes in practice, and the compliance of good corporate governance. The audit also ensures the compliance of all permissions, reports and obligations. Internal audit is primarily carried out by the company's own personnel. Whenever necessary, external experts are used to complement the audit activities.
Comptel complies with the insider guidelines of NASDAQ OMX Helsinki Ltd. In accordance with the Securities Market Act, Comptel maintains a register containing information on the so-called insiders with the duty to declare in the SIRE system of Euroclear Finland Ltd. Insiders comprise permanent insiders and project-specific insiders.
At the end of 2009 there were 17 insiders with the duty to declare (2008: 14) and 83 company-specific permanent insiders (84). The insiders with the duty to declare include the members of the Board of Directors, the President and CEO, the Corporate Executives and the principal auditor.
Comptel's insiders are obliged to comply with the so-called closed window rule which starts three weeks prior to the announcement of an interim report and financial statements and ends 24 hours after the announcement of such. Comptel does not apply the ‘open window' rule.
An updated list of insiders with the duty to declare and their share and option holdings in Comptel Corporation is available on the company's website.
The external auditor verifies that the company's annual accounts are correct and monitors the company's quarterly reporting. In addition, the auditors report to the Board of Directors in an ongoing fashion regarding the administration and operations.
KPMG Oy Ab acts as the auditors of Comptel, Mr Pekka Pajamo (APA) being the principal auditor.
For the financial year 2009, the fees for the auditors of Comptel Group totalled 223,000 euros (2008: 402,000) of which the fees from auditing services were 98,000 euros (97,000). The fees for non-audit services such as tax-advisory, IFRS consultancy and training services were 124,000 euros (305,000).
