The highest governing body of a company is the general meeting, in which the shareholders exercise their decisionmaking powers. An annual general meeting must be held once a year. Extraordinary general meetings must be held when requested by shareholders, when the shareholders demanding the handling of a given matter hold no less than 10% of the total number of the company’s shares. Matters within the decision-making power of the general meetings include the matters provided for in law or the articles of association, such as the remuneration and appointment of directors and auditors, adoption of the company’s financial statements, distribution of assets, discharge from liability of the executives, amendments to the articles of association, and decisions relating to the company’s shares or share capital. Thus, the general meeting does not have general competence, unlike the company’s board of directors. The board of directors has the right to refer matters falling within its general competence to the general meeting.
The board of directors
The board of directors shall see to the administration of the company and the appropriate organisation of its operations. The board of directors consists of directors appointed by the general meeting. The number of directors depends on the provisions of the company’s articles of association and the general meeting’s decisions and varies from one company to another. The boards of directors of Finnish listed companies usually consist of three to ten directors. The boards of directors of a majority of Finnish listed companies consist exclusively of directors who are not members of the company’s operative management (non-executive directors). The board of directors has an extensive general competence. The competence of the board of directors generally covers all matters that are not within the general meeting’s powers or part of the general competence of the managing director. It is the duty of the board of directors to ensure that the company is duly organised and that the board of directors is kept up to date with the development of the company’s circumstances and financial situation. The board of directors is responsible for the appropriate arrangement of the control of the company accounts and finances. The most essential tasks of the board of directors include appointing and discharging the managing director, deciding on the terms of the managing director’s service contract, such as the remuneration, as well as defining the company’s strategy and monitoring its implementation. Furthermore, the most important business decisions, such as mergers and acquisitions, major contracts, investments, and financing arrangements fall under the general competence of the board of directors.
Chairman of the board of directors
The Limited Liability Companies Act does not contain detailed provisions on the role of the chairman of the board of directors, and the duties of chairmen of the board of directors can therefore vary from one company to another. The chairman is responsible for ensuring that the board of directors convenes when necessary and that the decisions taken by the board of directors are documented. In other respects, the role or powers of the chairman do not differ from those of the other directors under the Limited Liability Companies Act. In practice, however, the role of the chairman of the board of directors is often considerably more extensive than that of the other directors in a listed company. The chairman of the board of directors is responsible for the organisation of the work of the board of directors. The chairman assists the managing director in his/her work and often represents the company in relation to important stakeholders. Depending on the company, the role of the chairman can, especially in strategically significant business transactions, be particularly important. The board of directors appoints a chairman amongst itself, unless the articles of association stipulate otherwise or a decision to the contrary is made when appointing the board of directors.
The board of directors can increase its efficiency by forming smaller compositions, committees, to take charge of certain specific tasks of the board of directors. The committees do not have a formal legal status or independent decision-making powers, and their role is to provide support in the preparation of the decision-making. The responsibility for the decisions remains with the board of directors even if the matter has been delegated to a committee. The most common committees in listed companies are audit committee, remuneration committee, and nomination committee, which are discussed in more detail in the Recommendation Section III of the Corporate Governance Code. In addition, the board of directors can also set up ad-hoc committees, for example, for the purpose of preparing for a major business transaction or in the event of conflicts of interests.
Managing director (CEO)
The board of directors has the power to appoint and discharge the managing director, who shall see to the daily administration of the company in accordance with the instructions and orders given by the board of directors. In listed companies, the managing director is responsible for the company’s operative activities. In addition to the daily administrative tasks, the decisions of the board of directors are often based on the managing director’s proposals, and the managing director is also responsible for their implementation. In practice, it is the managing director who organises the company’s operations, negotiates and concludes major business arrangements, and represents the company. Pursuant to the Limited Liability Companies Act, the managing director shall see to it that the accounts of the company are in compliance with the law and that its financial administration has been arranged in a reliable manner.
Listed companies also have an auditor, who is elected by the general meeting. At least one of the auditors of a listed company must be an approved auditor within the meaning of the Auditing Act or an auditing firm that satisfies the requirements of the Auditing Act. Auditors play an important role as a controlling body elected by the shareholders. Through the audit, shareholders receive an impartial opinion of the company’s financial statements and report by the board of directors, as well as of the company’s accounts and administration.