Corporate Governance

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 October 2008. 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.

GENERAL MEETING

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 and the President and CEO; the number of Board members and the remuneration paid to the Board members and auditors. The General Meeting elects the members to the Board of Directors as well as the company's auditors, deputy auditors and public accounting firm whenever necessary. 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.

The Annual General Meeting 2009 of Comptel Corporation 

BOARD OF DIRECTORS

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 operative management of the company.

The Board of Directors has confirmed the written charter that specifies the Board's duties, business to be handled, meeting practice and the decision-making process.

According to the written charter, the Board of Directors handles and decides on all matters that are financially, commercially or fundamentally significant for 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 the employment of the President and CEO.

As a general rule, the Board of Directors convenes once a month and additionally whenever necessary. In 2008 the Board of Directors convened 16 times (2007: 13). The average attendance of the members was 99 per cent (99).

The Board of Directors regularly evaluates its operations and working practices and carries out a related self-assessment once a year.

Election of Board members

As specified in the Articles of Association, the Board of Directors elects a minimum of three and a maximum of six members for one year at a time so that the term of office of all Board members ends at the close of the Annual General Meeting after the elections. The Board of Directors elects a chairman and a deputy 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 of the company's significant shareholders.

Board Committees

There are two permanent committees in 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 of Directors' preparation body which monitors and supervises the subjects related to company's financial reporting, external and internal audit and risk management.

In 2008, the Audit Committee convened four times (2007: six). The average attendance of the members was 92 per cent (100). In its meeting held after the Annual General Meeting 2009, the Board of Directors elected Mr Juhani Lassila as chairman and Mr Timo Kotilainen and Mr Petteri Walldén as members for the Audit Committee.

The Compensation Committee is the Board's preparation body which assists the Board of Directors in subjects related to the terms and conditions of employment and remuneration of the top management and prepares and develops the company's compensation systems.

In 2008, the Compensation Committee convened four times (2007: three). The average attendance of the members was 100 per cent (100). In its meeting held after the Annual General Meeting 2009, the Board of Directors elected Mr Olli Riikkala as chairman and Mr Timo Kotilainen and Mr Hannu Vaajoensuu as members for the Compensation Committee.

In addition, whenever needed, the Board has also set temporary working committees to prepare subjects for the Board. In 2008, the working committees of the Board convened eight times.

PRESIDENT AND CEO

The President and CEO is appointed by the Board of Directors. The Board of Directors decides on the terms and conditions of the CEO's employment, including the salary, other compensations and fringe benefits that are defined in the CEO's contract of employment. The CEO is responsible for ensuring that the objectives, strategy, plans, outlines and goals set by the Board of Directors are implemented and achieved in the Comptel Group. The 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 Harri Palviainen, Executive Vice President.

The retirement age of President and CEO Erviö has been agreed at 62 years. The CEO's period of notice is six months if dismissed by the company and two months if the 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.

CORPORATE EXECUTIVES

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.

Corporate Executives

In 2008, the Group had an Executive Board, which convened 11 times (11).

The management of business operations in Comptel is based on the operations of the profit and cost units. The subsidiaries and affiliated companies of Comptel Corporation 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 strategy.
 
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.

REMUNERATION

Board of Directors

Annual and meeting fees paid to Board members in 2008:

Board of Directors at 31 December 2008

Kotilainen Timo  35,000 
Lassila Juhani   36,000 
Mustaniemi Matti   35,000 
Riikkala Olli   67,000
Vaajoensuu Hannu   47,000 
Former member   
Hintikka Juhani      1,000 
Total euros  221,000 

The Annual General Meeting confirms the compensation to be paid to the members of the Board of Directors. The Annual General Meeting 2009 decided to keep the fees unchanged as follows:

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.

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 CEO for 2008 totalled 379,000 euros.

The salaries and fees of the other members of Executive Board for 2008 totalled 1,042,000 euros.

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 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 potential reward from the plan for the earning period 2009 will be based on the continuance of employment or service of a key person and on the Comptel Group's operating profit margin. The potential reward from the earning period 2009 will be paid partly as the company's shares and partly in cash in 2010. The proportion to be paid in cash will cover taxes and tax-related costs arising from the reward.

The plan is directed to approximately 15 people. The 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 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 CEO.

The 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

The Board of Directors of Comptel Corporation has confirmed the principles of internal control used in the Group. The objective with the internal control is to ensure that the business of the company is effective and profitable, the prepared financial information is reliable, and the company complies with all necessary provisions and policies. Control takes place in all units and at all levels of the organisation. The control actions include, for example, reporting, approval methods and compliance with the policies.

Risk management is an important part of Comptel's internal control. Risk management refers to a systematic process to identify, evaluate and control risks due to issues outside of the Group and risks arising from the Group's activity.

The Comptel risk management system aims at minimising the detrimental impacts of risks in 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 the risk management. The Chief Financial Officer is in charge of risk management coordination in the Group. As a general rule, the business organisation is 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, the decision-making process connected with commercial offers, agreements and investments, and other operative activities.

The risk management monitoring 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 results of the entire Group. The monthly internal reporting is carried out by business areas during the meetings of the Corporate Executives and in the audits of the Group's support functions.

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.

Comptel has valid and proper insurance coverage. The required insurance coverage amount is annually defined.

Internal audit is carried out according to 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 operation, 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 company's own personnel. Whenever necessary, external experts are used to complement the audit activities.

INSIDER ADMINISTRATION

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 2008 there were 14 insiders with the duty to declare (16) and 84 company-specific permanent insiders (65). The insiders with the duty to declare include the members of the Board of Directors, the 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 has ceased to 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.

AUDITING

The purpose of auditing is to ensure that the financial statements give correct and sufficient information about the Group's result and financial position during the financial period. In addition, the auditors report to the Board of Directors on the ongoing audit of the administration and functions.

KPMG Oy Ab acts as the auditors of Comptel, Mr Pekka Pajamo (APA) being the principal auditor.

For the financial year 2008, the fees paid for the auditors of Comptel Group totalled at 402,000 euros (429,000) of which the fees from auditing services were 97,000 euros (86,000). The fees paid to the auditing companies for non-audit services such as tax-advisory, IFRS consultancy and training services were 305,000 euros (343,000).

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