Corporate Governance in 2011

Annual General Meeting

Glaston’s Annual General Meeting, held on 5 April 2011, confirmed the financial statements and discharged the President & CEO and the Members of the Board of Directors from liability for financial year 2010.

Composition of the Board of Directors

From 1 January to 4 April 2011, the Members of the board were Claus von Bonsdorff, Klaus Cawén, Jan Lång, Carl-Johan Rosenbröijer, Christer Sumelius, Andreas Tallberg and Teuvo Salminen. Members of the Board Klaus Cawén and Jan Lång were not available when the Members of the Board of Directors were elected for the term of office 2011−2012.

The 2011 Annual General Meeting on 5 April 2011 elected the following to the company’s Board of Directors:

Andreas Tallberg, b. 1963, M.Sc.(Econ.)

Chairman of the Board since 2007
Independent of the company. Chairman of the Board of Directors of GWS Trade Oy, a significant shareholder, and Managing Director of Oy G.W.Sohlberg Ab, a significant shareholder.

Share ownership on 31.12.2011: no shares

Main occupation: Oy G.W. Sohlberg Ab, Managing Director since 2007

Christer Sumelius, b. 1946, M.Sc.(Econ.)

Deputy Chairman of the Board since 1995
Dependent on the company, independent of significant shareholders
Share ownership on 31.12.2011: 3,624,200 shares, including shares in the ownership of related parties and controlling interest companies

Main occupation: Chairman of the Board, Oy Investsum Ab since 1984

Carl-Johan Rosenbröijer, b. 1964, Ph.D.(Econ.)

Member of the Board since 1996
Dependent on the company, independent of significant shareholders

Share ownership on 31.12.2011: 12,600 shares

Main occupation: Senior Teacher, Arcada University of Applied Sciences since 2003

Claus von Bonsdorff, b. 1967, M.Sc.(Eng.), M.Sc.(Econ.)

Member of the Board since 2006.
Independent of the company, independent of significant shareholders

Share ownership on 31.12.2011: 122,600 shares

Main occupation: Head of Customer Operations, Strategy, Business Development and Marketing, Nokia Siemens Networks since 2007

Teuvo Salminen, b. 1954, M.Sc.(Econ.), APA

Member of the Board since 2010
Independent of the company, independent of significant shareholders

Share ownership on 31.12.2011: 50,000 shares

Main occupation: Professional Board Member

Pekka Vauramo, b. 1957, M.Sc.(Eng.)
Member of the Board since 2011

Independent of the company, independent of significant shareholders

Share ownership on 31.12.2011: 10,000 shares               
Main occupation: COO and Deputy to CEO, Cargotec Corporation

In 2010 Glaston’s Board of Directors held 15 meetings, of which 5 were via telephone conference. The attendance of Members of the Board at meetings was 94%.

President & CEO and Executive Management Group

The company’s President & CEO in 2011 was Arto Metsänen M.Sc.(Eng.) (b. 1956). At the end of 2011, the Executive Management Group had 8 members.

Arto Metsänen  b. 1956, M.Sc.(Eng.)
President & CEO and Chairman of the Executive Management Group since 1 September 2009

Tapio Engström b. 1963, M.Sc.(Econ.)
Chief Financial Officer
Employed by the company and Member of the Executive Management Group since 2010

Günter Befort b. 1954, B.Sc.(Eng.)
Senior Vice President, Software Solutions segment until 17 July 2011, Senior Advisor since 18 July 2011
Employed by the company and Member of the Executive Management Group since 2007

Juha Liettyä s. 1958, B.Sc.(Eng.)
Senior Vice President, Services segment
Employed by the company since 1986, Member of the Executive Management Group since 2007

Frank Chengdong Zhang b. 1968, e-MBA
General Manager, Asia
Employed by the company since 2008, member of the Executive Management Group since 2010

Tapani Lankinen b. 1968, M.A.
Senior Vice President, Human Resources
Employed by the company and Member of the Executive Management Group since 2010

Pekka Huuhka b. 1956, M.Sc.(Eng.)
Senior Vice President, Supply Chain
Employed by the company and Member of the Executive Management Group since 2010

Uwe Schmid, b. 1963, Ph.D.(Phys.)
Senior Vice President, Software Solutions
Employed by the company and Member of the Executive Management Group since 18 July 2011

Topi Saarenhovi, b. 1967, M.Sc.(Eng.)
Senior Vice President, Machines segment
Employed by the company and Member of the Executive Management Group from 2007 to 31 January 2011

The Executive Management Group met 11 times in 2011.

Remuneration of Board of Directors and the Executive Management Group in 2011

Remuneration of the Board of Directors

The 2011 Annual General Meeting approved annual remuneration to the Chairman of the Board of Directors amounting to EUR 40,000, to the Deputy Chairman EUR 30,000 and to other Members of the Board EUR 20,000. In addition, the Chairman of the Board was paid a meeting fee of EUR 800 and the other Members of the Board EUR 500 for those meetings of the Board that they attended. Remuneration for meetings held by telephone was paid on a different basis. The travel expenses of Members of the Board are compensated in accordance with the company’s travel rules. None of the Members of the Board receives from the company remuneration unconnected with their work on the Board of Directors. The Members of the Board are covered by voluntary pension insurance accrued from their Board of Directors’ remuneration. The value of the pension insurance corresponds with the Finnish TyEL pension scheme. Remuneration paid to the Board of Directors is outlined in more detail in Note 30 of the consolidated financial statements and in a separate salaries and bonuses report.

Remuneration of the President & CEO and the Executive Management Group

Remuneration of the President & CEO and the Members of the Executive Management Group consists of a fixed monthly salary, an annual bonus (variable salary component) and a share-based incentive plan (variable salary component) intended as a long-term reward. The annual bonus is determined on the basis of Glaston’s financial performance. The indicators used are the Group’s result, the business area’s or business unit’s result as well as personal targets agreed with supervisors. The maximum amount of the President & CEO’s annual bonus is 50% of annual salary. For the Members of the Executive Management Group, the maximum amount of annual bonus is 40% of annual salary.

In addition, the President & CEO has a separate share bonus plan, on the basis of which he received one year after the start of his employment relationship, i.e. on 3 September 2010, a total of 50,000 Glaston Corporation shares as well as cash to the sum required for the taxes and tax-related payments arising from the distributed shares on the date that the shares were awarded. The awarded shares cannot be conveyed or otherwise used within two years of the date they were awarded.

The President & CEO’s period of notice is three months. In addition, the President & CEO is paid compensation corresponding to 12 months’ salary if he is dismissed by the company. If more than 50% of the company’s shares are transferred to a new owner in connection with a merger or acquisition, the President & CEO shall have the right to terminate his employment contract with 1 month’s notice, in which case he shall be paid one-off severance pay of EUR 200,000.

The President & CEO has the opportunity to retire at 63 years of age. The President & CEO and one member of the Executive Management Group are entitled to a supplementary pension that exceeds the statutory scheme. The retirement age of other Members of the Executive Management Group is in accordance with normal local legislation.

Remuneration of the President & CEO and the members of the Executive Management Group in 2011 in presented in the section "Remuneration and Incentive Schemes.

On 9 June 2010, Glaston’s Board of Directors decided on a new share-based incentive plan for the Group’s key personnel. The plan had one performance period covering 2010 and 2011, with the vesting condition being the development of the Group’s operating result. The plan did not vest, as the vesting condition was not fulfilled.

On 12 December 2011, Glaston’s Board of Directors decided on a new share-based incentive plan for the Group’s key personnel. The share bonus plan has three performance periods, namely the calendar years 2012, 2013 and 2014. The company’s Board of Directors will decide on the plan’s performance criteria and the targets set for them at the beginning of each performance period. The possible bonus of the plan for performance period 2012 will be based on the Glaston Group’s operating result (EBIT) and net profit. The share bonus plan’s target group consists of around 25 people. The bonuses payable on the basis of the plan will correspond during three years to a maximum of 4.8 million Glaston Corporation shares.

Share ownership of the Board of Directors and Executive Management Group on 31 December 2011

Auditing
At the 2011 Annual General Meeting, the accounting firm Ernst & Young Oy was elected as the company’s auditor.

The responsible auditor was Harri Pärssinen APA. Auditing units representing Ernst & Young have mainly served as the auditors of the company’s subsidiaries in each country. In 2011 the Group’s auditing costs totalled EUR 578,000, of which Ernst & Young received EUR 492,000. Ernst & Young Oy’s auditing expenses for the audit for financial year 2011 totalled EUR 350,000. In addition, auditing units belonging to Ernst & Young have provided other advice to Group companies to a value of EUR 57,000.