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Corporate Governance Statement 2020

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Corporate Governance Statement 2020 KONE’S CORPORATE GOVERNANCE STATEMENT 2020 CORPORATE GOVERNANCE STATEMENT KONE’S GENERAL GOVERNANCE PRINCIPLES The duties and responsibilities of KONE Corporation’s ▪ decisions on the company’s corporate various governing bodies are determined by Finnish law structure and KONE’s corporate governance principles. KONE ▪ decisions on major acquisitions and complies with the Finnish Corporate Governance Code investments 2020 published by the Securities Market Association, ▪ decisions on other matters falling under the with the exception of recommendations 16 Board’s responsibility by law (Independence of the company of the members of the audit committee), 17 (Independence of the company of The Board has created rules of procedure stipulating the members of the remuneration committee) and 18 the duties of the Board, its Chairman and its (Independence of the company of the members of the Committees. The Board of Directors holds six regular nomination committee). The entire Code is available on meetings a year and additional meetings as required. the Internet at www.cgfinland.fi. These exceptions are The Board of Directors reviews its own performance due to the company’s ownership structure. The and procedures once a year. company’s largest shareholder, Antti Herlin, controls 62 percent of the company’s voting rights and 22 percent Members of the Board of its shares. The significant entrepreneurial risk The Annual General Meeting elects five to ten members associated with ownership is considered to justify the and no more than three deputy members to the Board main shareholder serving as either Chairman or of Directors for one year at a time in accordance with Member of the Board of Directors and of its Committees KONE Corporation’s Articles of Association. The Board and, in this capacity, overseeing the shareholders’ of Directors elects a Chairman and Vice Chairman interests. among its members. The proposals for Board members KONE’s administrative bodies and officers with the are prepared at the Nomination and Compensation greatest decision-making power are the General Committee and under the steering of the Chairman of Meeting of Shareholders, the Board of Directors of the Board. During the preparation and in the proposal to KONE Corporation, the full time Chairman of the Board the General Meeting of Shareholders attention is paid and the President and CEO. At the Annual General to the board candidates’ broad and mutually Meeting of Shareholders, the shareholders approve the complementary background, experience, expertise, consolidated financial statements, decide on the age, gender and views of both KONE’s business and distribution of profits, select the members of the Board other businesses so that the diversity of the board of Directors and the auditors and determine their supports KONE’s business and its future in the best compensation. available way. The independence of the members of KONE Corporation’s Annual General Meeting is the Board is assessed in line with the independence convened by the Board of Directors. According to the criteria of the Finnish Corporate Governance Code. Articles of Association, the Annual General Meeting of Shareholders shall be held within three months of the Committees closing of the financial year on a date decided by the The Board of Directors has appointed two committees Board of Directors. consisting of its members: the Audit Committee and the Nomination and Compensation Committee. The Board BOARD OF DIRECTORS has confirmed rules of procedure for both Committees. The Secretary to the Board acts as the Secretary of Duties and responsibilities both Committees. The Audit Committee monitors the Group’s financial The Board of Directors’ duties and responsibilities are situation and supervises reporting related to the defined primarily by the Articles of Association and the financial statements and interim reports. The Audit Finnish Limited Liability Companies’ Act. The Board’s Committee monitors and assesses the adequacy and duties include: appropriateness of KONE’s internal control and risk ▪ compiling of the Board of Directors’ report, management, as well as the adherence to rules and interim reports and financial statements regulations. It also monitors and evaluates how ▪ ensuring the proper organization and agreements and other transactions between the surveillance of the accounting and asset company and its related parties meet the requirements management relating to ordinary business operations and general ▪ preparation of proposals for the General market terms and monitors and oversees the financial Meeting and the convocation of the General statement and financial reporting process. In addition, Meetings the Audit Committee processes the description of the ▪ approval and confirmation of strategic main features of the internal control and risk guidelines and the principles of risk management systems pertaining to the financial management reporting process included in the company’s corporate ▪ ratification of annual budget and plans governance statement. In addition, it deals with the ▪ appointment of a full-time Chairman of the Corporation’s internal audit plans and reports. The Board and a President and CEO, and Director of Internal Audit reports the internal audit decisions on the terms and conditions of their results to the Committee. employment 1 KONE’S CORPORATE GOVERNANCE STATEMENT 2020 The Audit Committee evaluates the auditing of the are responsible for identifying, assessing and managing Group’s companies and the appropriateness of the risks that can threaten the achievement of their related arrangements and auditing services and business objectives as part of the strategic planning considers the auditors’ reports. Furthermore, the and budgeting processes. Key risks are reported to the Committee formulates a proposal to the Annual General Risk Management function, which consolidates the risk Meeting regarding the auditors to be selected for the information to the Executive Board. The Board of Corporation. Directors reviews the KONE risk portfolio regularly The Nomination and Compensation Committee based on the Executive Board’s assessment. The prepares proposals to be made to the Annual General ownership of identified risk exposures is assigned to Meeting regarding the nomination of Board members specific business units, and the Risk Management and their compensation and makes decisions regarding function facilitates and follows-up the execution of the senior management appointments and compensation. identified actions. The Committee also decides on the compensation systems to be used and prepares the remuneration Internal control policy and remuneration report for the company´s The goal of KONE’s internal control system is to ensure governing bodies. that the Group’s operations are efficient and profitable, risks are managed, eliminated or mitigated to an acceptable level and that the financial and operational MANAGEMENT reporting is reliable and in compliance with the applicable regulations, policies and practices. Full-time Chairman of the Board and the President The Board’s Audit Committee monitors the and CEO efficiency and functioning of the internal control KONE Corporation’s Board of Directors appoints the process. The management is responsible for full-time Chairman of the Board and the President and establishing and maintaining adequate internal controls CEO. The Board determines the terms and conditions and for monitoring the effectiveness as part of operative of employment of the full-time Chairman of the Board management. This is supported by dedicated Internal and the President and CEO, and these are defined in Controls function, which is responsible for facilitating their respective written contracts. The Chairman of the and coordinating the internal control design, Board prepares matters to be considered by the Board implementation and monitoring across the organization. together with the President and CEO and the corporate The KONE internal control framework is built and staff. The Chairman of the Board and the President and based on corporate values, Code of Conduct, a culture CEO are responsible for the execution of the targets, of honesty and high ethical standards. Such framework plans, strategies and goals set by the Board of is promoted by dedicated leadership, training programs, Directors within the KONE Group. The President and positive and disciplined corporate culture and working CEO is responsible for operational leadership within the environment as well as by attracting and promoting scope of the strategic plans, budgets, operational plans, dedicated and competent employees. guidelines and orders approved by KONE Corporation’s KONE internal controls are designed to manage, Board of Directors. The President and CEO presents eliminate and mitigate the relevant operational, operational issues to the Board, and is responsible for financial, and compliance risks, and they are linked to implementing the decisions of the Board. KONE’s processes and employee job roles. Controls are supported by global and local policies and Executive Board principles, and control design is continuously The Executive Board supports the President and CEO maintained by incorporating the changes and in executing the corporate strategy. The Executive development from the business operations and Board follows business developments, initiates actions information systems. and defines operating principles and methods in KONE business units are responsible for accordance with guidelines
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