BOARD OF DIRECTORS AND MANAGEMENT

The Board of Directors’ duties and responsibilities are defined primarily by the Articles of Association and the Finnish Limited Liability Companies’ Act. The Board’s duties include:

• compiling of the Board of Directors’ report, interim reports and financial statements

• ensuring the proper organization and surveillance of the accounting and asset management

• the preparation of proposals for the General Meeting and the convocation of the General Meetings

• the approval and confirmation of strategic guidelines and the principles of risk management the ratification of annual budgets and plans

• the appointment of a full-time Chairman of the Board and a President and CEO, and decisions on the terms and conditions of their employment

• decisions on the company’s corporate structure

• decisions on major acquisitions and investments

• decisions on other matters falling under the Board’s responsibility by law

The Board has created rules of procedure stipulating the duties of the Board, its Chairman and its Committees. The Board of Directors holds six regular meetings a year and additional meetings as required. The Board of Directors reviews its own performance and procedures once a year.

The Annual General Meeting elects five to ten members and no more than three deputy members to the Board of Directors for one year at a time in accordance with KONE Corporation’s Articles of Association. The Board of Directors elects a Chairman and Vice Chairman among its members. The proposals for Board members are prepared at the Nomination and Compensation Committee and under the steering of the Chairman of the Board. During the preparation and in the proposal to the General Meeting of Shareholders attention is paid to the board candidates’ broad and mutually complementary background, experience, expertise, age, gender and views of both KONE’s business and other businesses so that the diversity of the board supports KONE’s business and its future in the best available way.

The full-time Chairman of the Board of Directors of KONE Corporation is Antti Herlin. Jussi Herlin is the Vice Chairman of the Board. The other members of the Board are Matti Alahuhta, Anne Brunila, Susan Duinhoven, Iiris Herlin, Ravi Kant, Juhani Kaskeala and Sirpa Pietikäinen. Out of the nine Board Members, five are male and four female.

Of the Board members, Matti Alahuhta, Anne Brunila, Susan Duinhoven, Iiris Herlin, Ravi Kant, Juhani Kaskeala and Sirpa Pietikäinen are independent of the Corporation. With the exception of Antti Herlin, Iiris Herlin and Jussi Herlin, the other Board members are independent of the Corporation’s significant shareholders.

In 2019, the Board of Directors convened 9 times, with an average attendance rate of 97%. Jukka Ala-Mello serves as Secretary to the Board and to its Committees.

Read more about the members of the Board of Directors

The Board of Directors has appointed two committees consisting of its members: the Audit Committee and the Nomination and Compensation Committee. The Board has confirmed rules of procedure for both Committees. The Secretary to the Board acts as the Secretary of both Committees.

The Audit Committee

The Audit Committee monitors the Group’s financial situation and supervises reporting related to the financial statements and interim reports. The Audit Committee monitors and assesses the adequacy and appropriateness of KONE’s internal control and risk management, as well as the adherence to rules and regulations. It also monitors and oversees the financial statement and financial reporting process. In addition, the Audit Committee processes the description of the main features of the internal control and risk management systems pertaining to the financial reporting process included in the company’s corporate governance statement. In addition, it deals with the Corporation’s internal audit plans and reports. The Director of Internal Audit reports the internal audit results to the Committee. The Audit Committee evaluates the auditing of the Group’s companies and the appropriateness of the related arrangements and auditing services, and considers the auditors’ reports. Furthermore, the Committee formulates a proposal to the Annual General Meeting regarding the auditors to be selected for the Corporation.

Members of the Audit Committee:

Ravi Kant (Chairman), Anne Brunila, Antti Herlin and Jussi Herlin. Anne Brunila and Ravi Kant are independent of both the company and of significant shareholders.

The Audit Committee held 3 meetings in 2019, with an average attendance rate of 92%.

Caj Lövegren serves as the Head of Internal Audit.

The Nomination and Compensation Committee

The Nomination and Compensation Committee prepares proposals to be made to the Annual General Meeting regarding the nomination of Board members and their compensation and makes decisions regarding senior management appointments and compensation. The Committee also decides on the compensation systems to be used.

Members of the Nomination and Compensation Committee:

Antti Herlin (Chairman), Matti Alahuhta, Jussi Herlin and Juhani Kaskeala. Matti Alahuhta and Juhani Kaskeala are independent of both the company and of significant shareholders.

The Nomination and Compensation Committee held 3 meetings in 2019, with an average attendance rate of 100%.

The Annual General Meeting 2020 confirmed an annual compensation of EUR 60,000 (2019: 55,000) for the Chairman of the Board, EUR 50,000 (45,000) for the Vice Chairman and EUR 45,000 (40,000) for Board Members. In addition, a compensation of EUR 500 was approved for attendance at Board and Committee meetings but anyhow a fee of EUR 3,000 is paid per Committee meeting for a Chairman of the Committee residing outside of Finland and a fee of EUR 2,000 is paid per Committee meeting for those members residing outside of Finland. Of the annual remuneration, 40 percent will be paid in class B shares of KONE Corporation and the rest in cash.

Read more about compensation in the Remuneration Statement 2019

KONE Corporation’s Board of Directors appoints the full-time Chairman of the Board and the President and CEO. The Board determines the terms and conditions of employment of the full-time Chairman of the Board and the President and CEO, and these are defined in a their respective written contract. The Chairman of the Board prepares matters to be considered by the Board together with the President and CEO and the corporate staff. The Chairman of the Board and the President and CEO are responsible for the execution of the targets, plans, strategies and goals set by the Board of Directors within the KONE Group. The President and CEO is also responsible for operational leadership within the scope of the strategic plans, budgets, operational plans, guidelines and orders approved by KONE Corporation’s Board of Directors. The President and CEO presents operational issues to the Board, and is responsible for implementing the decisions of the Board.

Antti Herlin serves as the full-time chairman. Henrik Ehrnrooth serves as the President and CEO.

The Executive Board supports the President and CEO in executing the corporate strategy. The Executive Board follows business developments, initiates actions and defines operating principles and methods in accordance with guidelines handed down by the Board of Directors and the President and CEO. The Executive Board holds regular monthly meetings and additional meetings as required.

Members of the Executive Board:

KONE’s Executive Board consists of President and CEO Henrik Ehrnrooth and 13 Members. The other members of Executive Board are Max Alfthan, Axel Berkling, Klaus Cawén, Hugues Delval, Ilkka Hara, Thomas Hinnerskov, William Johnson, Mikko Korte, Maciej Kranz, Pierre Liautaud, Tomio Pihkala, Susanne Skippari, and Ken Schmid.

Read more about Executive Board members

Full-time Chairman

The compensation for Antti Herlin, full-time Chairman of the Board, consists of a basic salary and a yearly bonus decided by the Board on the basis of the Group’s financial result. The yearly bonus may not exceed 100 percent of the recipient’s annual salary. In 2019, Antti Herlin’s basic salary was EUR 468,488. In addition, his accrued bonus for 2019 totaled EUR 401,963. He was also paid EUR 61,000 as compensation for serving as Chairman of the Board.

The full-time Chairman’s retirement age and pension are determined in accordance with Finland’s Pensions Act. No separate agreement regarding early retirement has been made.

President and CEO

The President and CEO’s compensation consists of a basic salary and a yearly bonus determined annually by the Board on the basis of the Corporation’s key targets. The yearly bonus may not exceed 100 percent of the recipient’s annual salary.

Henrik Ehrnrooth’s annual base salary is EUR 750,000. In addition, his accrued bonus for 2019 totaled EUR 727,500.

Henrik Ehrnrooth is included in the share-based incentive plan for the Group’s senior management. The potential bonus is based on the growth in KONE’s net sales and operating profit. In April 2019, on the basis of the incentive plan for year 2018, Henrik Ehrnrooth received a reward of EUR 2,579,150 which consisted of 25,344 KONE class B shares together with a cash payment arising from the receipt of shares. The corresponding reward accrued from 2019 and due for payment in April 2020 is 32,531 KONE class B shares together with a cash payment to cover taxes and similar charges arising from the receipt of shares.

Henrik Ehrnrooth’s retirement age and pension are determined in accordance with Finland’s Pensions Act. No separate agreement regarding early retirement has been made. Should his employment contract be terminated before retirement, he has the right to the equivalent of 18 months’ salary, which includes the salary for a six-month term of notice.

Executive Board

The compensation for the members of the Executive Board comprises a base salary and a yearly bonus, based on the Group’s annual result and the achievement of personal targets, which can relate to, for example, strategy execution, safety or quality. The bonus amount is determined by the Nomination and Compensation Committee and may not exceed 50 percent of the annual salary.

The members of the Executive Board are included in the share-based incentive plan for senior management. In April 2019, on the basis of the incentive plan, the members of the Executive Board received a reward 131,794 KONE class B shares together with a cash payment equal to the amount required to cover taxes and similar charges arising from the receipt of shares. The corresponding reward accrued from 2019 and due for payment in April 2020 is 194,169 KONE class B shares together with a cash payment equal to the amount of taxes and similar charges.

No separate agreement regarding early retirement has been made for the members of the Executive Board. The compensation for the termination of the employment contract prior to retirement is a maximum of 15 months’ salary, which includes the salary for a six-month term of notice.

Read more about compensation in the Remuneration Statement 2019