Corporate Governance Report – Corporate governance

Corporate governance The task of corporate governance is to ensure the company’s commitments to all of its stakeholders: shareholders, customers, suppliers, creditors, society and employees. It must be structured in a way that supports the company’s long-term strategy, ­market presence and competitiveness. Corporate governance shall be reliable, clear, simple and business-oriented. This ­Corporate Governance Report forms part of the Board of Directors’ Report for Essity’s 2019 Annual Report. The report has been reviewed by the company’s auditors.

Corporate governance, including Swedish Code of Corporate Sustainability remuneration, pages 46–55. Governance without any deviations Essity’s sustainability work is an integral This section describes applicable (www.corporategovernanceboard.se). part of the company’s business model. regulatory rules and regulations for The company’s sustainability report the Group’s corporate governance and Risk management, pages 34–39 forms part of the Board of Directors’ the company’s management structure Essity’s processes to identify and man- Report. The sustainability work helps and organization. It details the Board of age risks are part of the Group’s strategy reduce risks and costs, strengthen Directors’ responsibilities and its work work and are pursued at a local and competitiveness, attract new employees during the year. Information regarding Group-wide level. The section dealing and investors, and contributes toward a remuneration and remuneration issues with risk management describes the more sustainable world. and Essity’s internal control are also most significant risks and procedures included here. Essity applies the used to eliminate or limit these risks.

Governance at Essity Shareholders

1. General shareholder meeting 1. General shareholder 2. Nomination 3. External auditors The general shareholder meeting is Essity’s meeting Committee highest decision-making body, which all of 6. Remuneration the company’s shareholders are entitled to 5. Audit Committee 4. Board of Directors Committee attend, to have a matter considered and to vote for all shares held by the shareholder. 7. Internal audit 8. President and CEO The company’s Board of Directors and auditor are elected at the Annual General 8. Executive Meeting (AGM). The AGM also resolves on Management Team the remuneration of the Board members and determines guidelines for the remuner- 9. Business units ation of senior executives. Essity has two and global units listed classes of shares: Class A and Class B shares. Every Class A share represents ten consolidated financial statements and than twelve members elected by the AGM. votes while every Class B share represents the Board’s and President’s administration. The Board of Directors also includes three one vote. There are no other restrictions The auditor submits an audit report from employee representatives with deputies, relating to voting rights in respect of shares this review. who are appointed by the respective used by shareholders at the general share- The audit is performed in accordance employee organizations under Swedish law. holders meeting. Essity holds no treasury with the Swedish Companies Act, Inter- Essity’s Articles of Association contain no shares. national Standards on Auditing (ISA) and provisions regarding appointment or dis- generally accepted auditing principles missal of Board members or amendments 2. Nomination Committee in Sweden. to the Articles. The general shareholder Shareholders appoint members of the meeting has not delegated to the Board Nomination Committee at the AGM, or stip- 4. Board of Directors to resolve to issue new shares or to repur- ulate how the members shall be appointed. The Board of Directors has overall respon- chase own shares. The Nomination Committee represents sibility for the Company’s organization and the company’s shareholders. A majority of administration. This responsibility is ful- Chairman of the Board the members shall be independent of the filled, inter alia, through regular monitoring The Chairman of the Board leads the work company and corporate management. The of the business and by ensuring the appro- of the Board and is responsible for ensuring President and other members of corporate priateness of the organization, including that it is effectively organized and that management may not be a member of the the management team, and by issuing work is efficiently conducted. This includes Nomination Committee. The main duty of guidelines and reporting from internal continuous monitoring by the Chairman of the Nomination Committee is to prepare control. The Board approves strategies and the company’s operations in close dialogue and present proposals for the AGM’s resolu- targets, and decides on major investments, with the President and ensuring that other tions with respect to election and remuner- acquisitions and divestments of operations, Board members receive information and ation matters. among other matters. decision data that will enable high-quality The Board of Directors comprises nine discussion and decisions by the Board. 3. External auditors members elected by the shareholders at The Chairman leads the assessment of The company’s auditor is elected at the the 2019 AGM. According to the Articles the Board’s and the President’s work. The Annual General Meeting and is responsible of Association, the Board of Directors is to Chairman also represents the company in for reviewing Essity’s annual report and consist of not less than three and not more ownership matters.

46 Essity’s Annual and Sustainability Report 2019 Corporate Governance Report – Corporate governance

5. Audit Committee including the company’s Code of Conduct. nated. The business units are responsible The role of the Audit Committee is to mon- The internal audit also provides investiga- for their operating results, capital and cash itor the company’s financial reporting and tions and consultancy services in connec- flow. The business and earnings position provide recommendations and proposals tion with internal control matters and risk is followed up by the entire Executive to ensure the reliability of reporting. With management. Management Team on a monthly basis. regard to the financial reporting, the Com- Each quarter, business review meetings are mittee overseas the effectiveness of the 8. President and Executive conducted during which the management company’s internal control, internal audit Management Team of each business unit personally meets with and risk management. The Audit Com- Essity’s President and CEO is responsible the President and the CFO. These meetings mittee keeps itself continuously informed for and manages the day-to-day adminis- function as a complement to the daily mon- about the audit of the annual report and tration of the Group and follows the Board’s itoring of operations. Through working pro- consolidated financial statements and guidelines and instructions. The President cedures and terms of reference, a number where applicable about the conclusions and CEO is supported by the Executive of issues of material significance are placed of the quality control by the Swedish Management Team, see pages 54–55, the under the control of the CEO and the com- Inspectorate of Auditors concerning the work of which is led by the President. The pany’s Board of Directors. Essity reports company’s external auditor. The Committee Executive Management Team comprises its operations according to three business receives and addresses the supplementary the President, four Group Function Senior areas: Personal Care, Consumer Tissue and report to the audit report concerning the Vice Presidents, four Business Unit Presi- Professional Hygiene. conducted audit that the auditor submits dents and the Presidents of the three global in accordance with the EU Audit Regula- units. The working procedures for the tion. The Audit Committee informs the Board of Directors and terms of reference Board of its observations and the results issued by the Board of Directors to the Rules and regulations of the audit. The Audit Committee also President detail, for example, the division Certain internal rules and regulations Articles of Association examines and monitors the impartiality and of work between the Board and President. • • Working procedures of the Board of independence of the auditor. In respect to In consultation with the Chairman and Sec- Directors, including instructions for the this, particular attention is paid to whether retary of the Board, the President prepares Audit Committee and the Remuneration the auditor is providing the company with documentation and decision data for the Committee services other than auditing services. The Board’s work. • Terms of reference issued by the Board Committee also assesses the work of the to the President Code of Conduct auditor and provides proposals to the com- • 9. Business units and global units: • Policy documents and instructions (in pany’s Nomination Committee concerning Business units: areas such as finance, human resources, the appointment of auditor for the following • Consumer Goods, which offers con- sustainability, internal control, commu- mandate period. sumer tissue, baby care and feminine nication, pension and risk management Members of the Audit Committee are care in Europe, the Middle East and as well as for specific issues, such as not employed by the company and at least Africa. the processing of personal data, insider issues, conflicts of interest, competition one member has accounting or auditing • Health and Medical Solutions, which law, corruption and diversity) expertise. offers incontinence products in Europe, North America, the Middle East and Certain external rules and regulations The Swedish Companies Act 6. Remuneration Committee Africa and medical solutions in Asia, • • The Swedish Annual Accounts Act The Remuneration Committee drafts Europe, North America, the Middle East • International Financial Reporting the Board’s motions on issues relating to and Africa. Standards (IFRS) remuneration principles, remuneration • Latin America, which offers consumer • EU Market Abuse Regulation (MAR) and other terms and conditions of employ- tissue, baby care, incontinence products, • Nasdaq Stockholm’s rules for issuers ment for the President and is authorized medical solutions, feminine care and • Swedish Code of Corporate Governance to make decisions in these matters for the professional hygiene in Latin America. Compliance with stock market regulations ­company’s other senior executives. The • Professional Hygiene, which offers • Essity complies with rules that apply in Committee monitors and assesses pro- ­professional hygiene in Europe, North Sweden for listed companies and was grams for variable remuneration, the appli- America, the Middle East and Africa. not sanctioned by Finansinspektionen, the stock exchange’s disciplinary board cation of the AGM’s resolution on guidelines or any other authority or self-regulating for remuneration of senior executives and Global units: body for violations of the rules concern- the applicable remuneration structure and • Global Brand, Innovation and Sustainabil- ing the stock market. remuneration levels in the Group. ity has global responsibility for cust- omer and consumer brands, innovation 7. Internal audit and sustainability and public affairs. The internal audit assists the Group in • Global Manufacturing has global respon- More detailed information about improving and protecting the organization’s sibility for production and technology Essity’s corporate governance is value through a risk-based, independent concerning all product categories with available on www.essity.com and objective assurance and consultancy the exception of medical solutions. Articles of Association services. The internal audit reports to the Global Operational Services has global • • • Swedish Code of Corporate Governance Audit Committee and the Board in relation responsibility for sourcing, logistics, busi- • Information from the Nomination to internal audit issues. The internal audi- ness services, IT and digitalization. Committee ahead of the 2020 Annual tors are geographically located throughout Essity’s business units and global units General Meeting (composition, propos- the world where Essity conducts opera- adhere to the principle of distinct decen- als and work) tions. The internal audit examines, among tralization of responsibility and authority. • Other information ahead of the 2020 Annual General Meeting (notice, Board other aspects, Essity’s internal processes The business units and the global units have proposal for guidelines for remuneration for sales, sourcing, financial reporting, IT a delegated responsibility for managing of senior executives, information about systems, information security, HR issues, and developing their respective operations routines for notifying attendance at the sustainability, various types of projects through established objectives and strate- Meeting, etc.). and compliance with Essity’s internal rules, gies, a process that is also centrally coordi-

Essity’s Annual and Sustainability Report 2019 47 Corporate Governance Report – Corporate governance

Activities during the year

Annual General Meeting additional members from among the next Composition of the Nomination Essity held its AGM in Stockholm on largest shareholders in terms of voting Committee for the 2020 AGM Thursday, April 4, 2019. rights. The total number of members shall The composition of the Nomination The AGM elected the company’s Board be not more than seven. In the event that a Committee for the 2020 AGM is as follows: of Directors. Moreover, guidelines for deter- member steps down from the Nomination • Helena Stjernholm, AB Industrivärden, mining the salary and other remuneration Committee before the task is completed Chairman of the Nomination Committee of the President and other senior executives and the Nomination Committee decides • Jonas Jølle, Norges Bank Investment were adopted, see page 50 and Note C2 it would be beneficial for a replacement Management on pages 80–81. to be appointed, such a replacement is • Stefan Nilsson, Handelsbanken to be appointed by the same shareholder Pension Funds and others Nomination Committee or, if this shareholder is no longer among • Anders Oscarsson, AMF and AMF Fonder Under the Swedish Corporate Governance the largest shareholders in terms of voting • Pär Boman, Chairman of the Board, Essity Code, a company listed on Nasdaq Stock- rights, by the next largest shareholder in holm shall have a nomination committee, terms of voting rights. Changes to the All shareholders have had an opportunity the purpose of which is to make proposals composition of the Nomination Committee to submit proposals to the Nomination to the AGM in respect of the election of are to be disclosed immediately. Committee. The Nomination Committee’s the Chairman of the Meeting, Board of The composition of the Nomination proposal for the 2020 AGM is presented in Directors, Chairman of the Board and audi- Committee is to be announced by Essity the notice convening the AGM available on tor, remuneration of each Board Member no later than six months prior to the AGM. Essity’s website www.essity.com. The 2020 (divided between the Chairman of the No remuneration is to be paid to the mem- AGM will be held on Thursday, April 2, see Board and other Board Members), remuner- bers of the Nomination Committee. Any page 8. ation of the auditor, and where applicable, expenses incurred during the work of the The Nomination Committee was con- proposals for amendments to the instruc- Nomination Committee are to be paid by vened on two occasions prior to the 2020 tion for the Nomination Committee. At the Essity. The mandate period of the Nomina- AGM. The Chairman of the Board presented 2017 AGM, the following instructions to the tion Committee extends until the compo- the Board evaluation and provided the Nomination Committee were adopted to sition of the next Nomination Committee is Nomination Committee with information apply until further notice: disclosed. The Nomination Committee is to regarding Board and committee work “The Nomination Committee is to com- submit proposals relating to the Chairman during the year. When preparing proposals prise representatives of the four largest of the Meeting, the Board of Directors, the for the Board for the 2020 AGM, particular shareholders, who express a wish to take Chairman of the Board, Board fees for the attention has been paid to the issues of part in the Nomination Committee, in terms Chairman of the Board and each of the diversity and an even gender distribution, of voting rights as per the shareholders’ other Board members, including remuner- and the Nomination Committee thus register maintained by the company on ation for committee work, the company’s applied Item 4.1 of the Swedish Corporate the final banking day of August, as well as auditor and auditor’s fees, and to the extent Governance Code as its diversity policy. the Chairman of the Board, who also con- deemed necessary, proposals for amend- The aim was to retain gender balance venes the first meeting of the Nomination ments to this instruction.” on both the Board and the Board’s com- Committee. The member representing the In its work, the Nomination Committee is mittees. When preparing its proposal for largest shareholder in terms of votes is to to consider the rules that apply to the inde- the election of auditors, the Nomination be appointed as Chairman of the Nomina- pendence of Board members, as well as the Committee also gave consideration to the tion Committee. The Chairman of the Board requirement of diversity and breadth with recommendation of the Audit Committee. shall not be Chairman of the Nomination the endeavor to achieve an even gender Committee. If necessary, due to subse- distribution and that the selection shall Board of Directors quent ownership changes, the Nomination be based on expertise and experience Essity’s Board of Directors comprises Committee is entitled to call on one or two relevant to Essity. nine members elected by the AGM.

Board of Directors and committees Composition of the largest Committees Attendance1) shareholders, Nomination Committee Board of Audit at August 31, 2019 (share of votes) Depend- Remuner- Directors Committee Remuneration Board of Directors Elected ence Audit ation (9) (6) Committee (3) % Ewa Björling 2016 9/9 AB Industrivärden 29.9 Pär Boman 2016 x Chairman 9/9 6/6 3/3 Norges Bank Investment Management 6.9 Maija-Liisa Friman 2016 9/9 Handelsbanken’s foundations, etc. 3.8 Annemarie Gardshol 2016 8/9 AMF Insurance and Funds 3.3 Magnus Groth 2016 9/9 Bert Nordberg 2016 x x 9/9 6/6 3/3 Louise Svanberg 2016 x 9/9 3/3 Lars Rebien Sørensen 2017 8/9 Barbara Milian Thoralfsson 2016 Chairman 9/9 6/6 1) Board meetings January 1–December 31, 2019. = Dependent in relation to the company’s major shareholder, AB Industrivärden. = President of Essity, dependent in relation to the company and corporate management.

48 Essity’s Annual and Sustainability Report 2019 Corporate Governance Report – Corporate governance

Ewa Björling, Pär Boman, Maija-Liisa Friman, profitability programs. During the autumn, senior executives taking into account Annemarie Gardshol, Magnus Groth, Bert the Board of Directors also focused on new legislative requirements. Nordberg, Louise Svanberg, Lars Rebien strategy work and issues in connection with Sørensen and Barbara Milian Thoralfsson the cost-savings program presented by the Internal audit were elected as Board members in 2019. company on September 28, 2018, in light of The basis of the work of the internal audit Pär Boman was elected as the Chairman the then prevailing market situation, raised is a risk analysis based on external and of the Board. raw material and energy costs and events internal information carried out in close The independence of Board members is in the business environment. dialogue with management teams at Essity. presented in the table on page 48. Essity The risk analysis forms the basis of an complies with the requirements of the Evaluation of the Board’s work audit plan, which is presented to the Audit Swedish Corporate Governance Code that The work of the Board, like that of the Committee together with the risk analysis. stipulate that not more than one member President and the Chairman, is evaluated In 2019, 114 audit projects were performed elected by the AGM shall be a member of annually using a systematic and structured and reported at meetings with the Audit corporate management, that the majority process. The purpose of this work is to Committee. of the members elected by the AGM shall obtain a sound basis for the Board’s own Work in 2019 involved follow-up of the be independent of the company and development work and to provide the Nom- units’ progress with process-based con- company management, and that not fewer ination Committee with decision data for trol, follow-up of the efficiency in internal than two of these shall also be independent its nomination work. External expertise was governance and control, follow-up of major of the company’s major shareholders. All used. The evaluation took the form of an investments and restructuring programs, of the AGM-elected Board members have anonymous questionnaire and interviews follow-up of sustainability, and follow-up experience of the requirements incumbent as well as group and individual discussions. of compliance with Essity’s policies. upon a listed company. Five of the Board The evaluation covers such areas as the members are women, corresponding to Board’s methods of work, effectiveness, External auditor 55% of the total number of AGM-elected expertise and the year’s work. The Board The 2019 Annual General Meeting Board members. The employees have was provided with feedback after the appointed the accounting firm of Ernst & appointed Susanna Naumanen, Örjan results were compiled. The Nomination Young AB as the company’s auditor for a Svensson and Niclas Thulin as representa- Committee was also informed of the mandate period of one year. The account- tives to the Board for the period until the results of the evaluation. ing firm notified the company that Hamish 2020 AGM, and their deputies Niklas Eng- Mabon, Authorized Public Accountant, dahl, Martin Ericsson and Andreas Larsson. Audit Committee would be the auditor in charge. Hamish The Audit Committee comprises Chairman Mabon is also the auditor for Svenska Board activities Barbara Milian Thoralfsson, Pär Boman and ­Cellulosa Aktiebolaget SCA, Skanska AB, In 2019, the Board was convened nine Bert Nordberg. The Audit Committee held AB Tetra Pak and Husqvarna AB, among times. The Board has fixed working pro- six meetings during the year. In addition, other companies. He owns no shares in cedures that describe in detail which members have also held meetings with the company. ordinary agenda items are to be addressed internal audit, the auditors and the CFO, In accordance with its formal work plan, at the various Board meetings of the year. and held meetings with the auditors and the Board met with the auditors at three Recurring agenda items are finances, the CFOs of large partly-owned companies. In scheduled Board meetings in 2019. The market situation, investments and adoption its monitoring of the financial reporting, the auditor also attended each meeting of the of the financial reports. The Board also Committee dealt with relevant accounting Audit Committee. At these meetings, the establishes and evaluates the company’s issues, internal auditors’ reviews, auditing auditor presented and received opinions overall targets and strategy and decides on work, a review of various measurement on the focus and scope of the planned significant internal rules. Another key task is issues, such as testing of impairment audit and delivered verbal audit and review to continuously monitor the internal control requirements for goodwill, and the pre- reports. Furthermore, at the Board’s third of the compliance of the company and conditions for the year’s pension liability scheduled autumn meeting, the auditor its employees with relevant internal and calculations. The Audit Committee also delivered an in-depth verbal report on the external rules, and that the company has prepared a recommendation to be used by audit for the year. The working procedures well-functioning procedures for market dis- the Nomination Committee when deciding specify a number of mandatory issues that closures. On a regular basis throughout the on its proposal to the AGM regarding the must be addressed. These include matters year, the Board has also dealt with reports election of auditors. of importance that have been a cause for from the Audit and Remuneration Com- concern or discussion during the audit, mittees and reports on strategy, market, Remuneration Committee business routines and transactions where internal audit, internal control and financial The Remuneration Committee comprises differences of opinion may exist regarding operations. The company’s auditor regu- Chairman Pär Boman, Bert Nordberg and the choice of accounting methods. The larly presents a report on its audit work and Louise Svanberg. The Remuneration Com- auditor shall also disclose consultancy these issues are discussed by the Board. mittee held three meetings in 2019. Activ- work conducted for Essity as well as other The Business Unit Presidents present their ities mainly concerned remuneration and dependencies in relation to the company respective operations and current issues other employment terms and conditions and its management. On each occasion, affecting them. for senior executives, and current remune­ Board members have had an opportunity In 2019, the Board of Directors has — ration structures and remuneration levels to ask the auditors questions. Certain parts in addition to the customary work of the in the Group. In addition, the Committee of the detailed discussion on the accounts Board — focused on the integration of BSN prepared the question, prior to the Board’s take place without representatives of medical and on issues within the scope decision, of guidelines for remuneration of company management being present. of ongoing efficiency improvement and

Essity’s Annual and Sustainability Report 2019 49 Corporate Governance Report – Corporate governance

Remuneration, Management and Board of Directors

Guidelines Variable remuneration and Remuneration of the Board The 2019 AGM adopted guidelines for strategic targets The total remuneration of the AGM- remuneration of senior executives that Programs for variable remuneration are elected Board members amounted to are based on a total remuneration package formulated to support the Group’s stra- SEK 9,010,000 in accordance with the comprising a fixed salary, variable salary tegic targets. The short-term program is AGM’s resolution. See Note C3 on and other benefits, and a pension, see individually adapted and based mainly page 82 for further information. Note C2 on pages 80–81. Updated guide- on cash flow, EBITA margin and organic lines, adapted to the new legal provisions sales growth. The long-term program is on remuneration to senior executives and based on the Essity share’s long-term total changes in the Swedish Corporate Gov- shareholder return, whereby remuneration ernance Code that took effect on January is linked to the performance of the com- 1, 2020, have been proposed to the 2020 pany’s B share, measured as the TSR (Total AGM, see pages 29–30. Shareholder Return) index compared with the MSCI Household Products Index, Remuneration of the President and Consumer Staples, which contains com- other senior executives petitors’ shares over a three-year period, Remuneration of the President and other where the maximum outcome requires senior executives is presented in Note C2 a 5% better outcome for the Essity share on pages 80–81. Variable remuneration for compared with the benchmark index the President, CFO and other senior exec- during the multiannual period. utives was maximized to a total of 100% of Payment of remuneration for achieving the fixed salary for 2019. For two Business the long-term performance target is also Unit Presidents, stationed in Latin America associated with requirements for certain and the US, the maximum outcome is investments in the Essity share and multi- 110–130%. year ownership of the shares.

50 Essity’s Annual and Sustainability Report 2019 Corporate Governance Report – Corporate governance

Internal control and financial reporting

The Board’s responsibility for internal External financial reporting Essity are responsible for carrying out the governance and control is regulated in The quality of external financial reporting necessary control measures with respect the Swedish Companies Act, the Annual is guaranteed via a number of actions and to financial reporting. An important role Accounts Act and the Swedish Corporate procedures. The President is responsible is played by the business unit’s controller Governance Code. The Annual Accounts for ensuring that all information issued, organizations, which are responsible for Act requires that the company, each year, such as press releases with financial con- ensuring that financial reporting from describes its system for internal control tent, presentation material for meetings each unit is correct, complete and deliv- and risk management with respect to with the media, owners and financial insti- ered in a timely manner. In addition, each financial reporting. The Board bears the tutions, is correct and of a high quality. The business unit has a Finance Manager with overall responsibility for financial report- responsibilities of the company’s auditors responsibility for the individual business ing and its working procedures regulate include reviewing accounting issues that unit’s financial statements. The company’s the internal division of work between the are critical for the financial reporting and control activities are supported by the Board and its committees. reporting their observations to the Audit budgets prepared by each business unit The Audit Committee has the important Committee and the Board of Directors. and updated during the year through task of preparing the Board’s work to In addition to the audit of the annual continuous forecasts. assure the quality of financial reporting. accounts, a review of the half-year Essity has a standardized system of This preparation work includes issues report and of the company’s administra- control measures involving processes that relating to internal control and regulation tion and internal control is carried out. are significant to the company’s financial compliance, control of recognized val- reporting. The controls are adapted to the ues, estimations, assessments and other Risk management operational process and system structure activities that may impact the quality of With regard to financial reporting, the risk of each unit. Accordingly, each unit pre- the financial reports. The Committee has that material errors may be made when pares a record of the actual controls to be charged the company’s auditor with the reporting the company’s financial position carried out in the unit in question. Control task of specifically examining the degree and results is considered the primary of these processes is assessed through of compliance in the company with the risk. To minimize this risk, control docu- self-evaluation followed up by an internal rules for internal control, both general ments have been established pertaining audit. In some cases, Essity has enlisted and detailed. to accounting, procedures for annual external help to validate these controls. accounts and follow-up of reported annual Financial results are reported and exam- Financial reporting to the Board accounts. There is also a joint system for ined regularly within the management The Board’s working procedures stipu- reporting annual accounts. Essity’s Board teams of the operating units and commu- late which reports and information of a of Directors and management assess the nicated to Essity’s management at monthly financial nature are to be submitted to the financial reporting from a risk perspective and quarterly meetings. Before reports Board at each scheduled meeting. The on an ongoing basis. To provide support are issued, results are analyzed to identify President, together with the Chairman, for this assessment, the company’s income and eliminate any mistakes in the process ensures that the Board receives the reports statement and balance sheet items are until the year-end closing. For additional required to enable the Board to continu- compared with earlier reports, budgets information, see the Internal audit section ously assess the company’s and Group’s and other planned figures. Control activi- on page 49. financial position. Detailed instructions ties that are significant to financial report- The Board follows up to ensure that the specifically outline the types of reports ing are carried out using the company’s internal control and reporting to the Board that the Board is to receive at each meeting. IT system. For further information, see the functions through continuous reporting Risk and risk management section on from the President and CFO and through Internal reporting pages 34–39. reporting from the internal audit unit in For a number of years now, Essity has the scope of the audit plan set annually. used a shared reporting system for finan- Control activities and follow-up Internal audit also continuously reports cial reports. An increasing number of units Significant instructions and guidelines its observations in this respect to the within Essity are also introducing the same related to financial reporting are prepared Audit Committee. Internal audit’s tasks accounting system based on a common and updated regularly by the Group Func- include following up compliance with the IT platform. tion Finance and are easily accessible on company’s internal rules, and the results Accounting and reporting for several the Group’s intranet. The Group Function of this follow-up are reported to the Board units are, to a certain extent, conducted Finance is responsible for ensuring com- through the Audit Committee. in Shared Service Centers. Reporting is pliance with instructions and guidelines. therefore more efficient and uniform. Process managers at various levels within

Essity’s Annual and Sustainability Report 2019 51 Corporate Governance Report – Board of Directors and Auditors

Board of Directors and Auditors

Elected by the Annual General Meeting

Pär Boman (1961) Ewa Björling (1961) Engineering and Business Administration Med. Dr. Sci. and Associate Professor from degrees Karolinska Institutet. Chairman of the Board since 2016. Chairman of the Board of The Swedish Petroleum Chairman of the Board of Svenska & Biofuels Institute (SPBI). Member of the boards of Handelsbanken AB and Svenska Cellulosa Biogaia AB, Bioarctic AB and Mobilaris AB. Former Aktiebolaget SCA, Deputy Chairman of the member of the Boards of the Swedish National Board of AB Industrivärden and member Insurance Office, the Swedish International of the Board of Skanska AB. Development Cooperation Agency (SIDA) and 2006–2015 President of Handelsbanken Svenska Cellulosa Aktiebolaget SCA. Elected: 2016 Minister for Trade 2007–2014, and Minister for Nordic Cooperation 2010–2014. Previously Independent of the company and corporate Karolinska Institutet. management. Elected: 2016 Own shareholdings and those of related persons, Class B shares: 3,000 Independent of the company, corporate manage- ment and Essity’s major shareholders. Own shareholdings and those of related persons: 0

Maija-Liisa Friman (1952) Annemarie Gardshol (1967) MSc Eng. MSc Eng. Partner of Boardman Oy. Member of the Board of Svenska Cellulosa Former Chairman of the Board of Helsinki Aktiebolaget SCA. Deaconess Institute and Ekokem. Vice Chairman CEO of PostNord and President PostNord of Neste Corporation, member of the Boards Sverige. of TeliaSonera, Rautaruukki, Metso, Talvivaara Former member of the Boards of Etac AB, Mining Company Plc, Finnair, Svenska Cellulosa Bygghemma AB, Ortivus and Semcon. Former Aktiebolaget SCA and Securities Market President of PostNord Strålfors Group AB and Association. various management positions in Gambro AB Former CEO of Aspocomp Group Plc 2004–2007 and McKinsey & Company. and President of Vattenfall Oy and Gyproc Oy. Elected: 2016 Elected: 2016 Independent of the company, corporate Independent of the company, corporate ­management and Essity’s major shareholders. ­management and Essity’s major shareholders. Own shareholdings and those of related Own shareholdings and those of related persons, Class B shares: 2,300 persons: 0

Bert Nordberg (1956) Louise Svanberg (1958) Engineer MSc Econ. Chairman of the Board of Vestas Wind Systems Member of the Boards of Dana Farber Cancer A/S. Member of the Boards of Svenska Cellulosa Institute, Boston and CERAS Health, New York. Aktiebolaget SCA and SAAB. Chairman of the Swedes Worldwide Previously held various management positions organization. in Digital Equipment Corp. and Ericsson, Previously held various management positions President of Sony Mobile Communications AB in EF Education First, including President 2009–2012. Former Chairman of the Board of 2002–2008 and Chairman of the Board Sony Mobile Communications and member of 2008–2010. Former member of the Boards the Boards of BlackBerry Ltd, Skistar AB, Axis AB of Careers Australia Group Ltd and Svenska and AB Electrolux. Cellulosa Aktiebolaget SCA. Elected: 2016 Elected: 2016 Independent of the company, corporate Independent of the company, corporate ­management and Essity’s major shareholders. ­management and Essity’s major shareholders. Own shareholdings and those of related Own shareholdings and those of related ­persons, Class B shares: 16,800 ­persons, Class B shares: 18,940

Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2019.

52 Essity’s Annual and Sustainability Report 2019 Corporate Governance Report – Board of Directors and Auditors

Appointed by the employees

Lars Rebien Sørensen (1954) Susanna Naumanen (1966) BSc Forestry and MSc Econ. Operator at Essity Hygiene and Chairman of Axcel. Member of the Boards Health AB, Falkenberg of Jungbunzlauer, Novo Holding A/S, Novo Member of the Swedish Trade Union Nordisk Foundation and Thermo Fisher Confederation (LO). Scientific Inc. Appointed: 2019 Former Deputy Chairman of the Board of Own shareholdings and those of Carlsberg A/S, President and CEO of Novo related persons: 0 Nordisk 2000–2017. Elected: 2017 Independent of the company, corporate management and Essity’s major shareholders. Own shareholdings and those of related persons: 0

Barbara Milian Thoralfsson (1959) Örjan Svensson (1963) MBA, BA Senior Industrial Safety Member of the Board of Hilti AG, G4S Plc Representative at Essity Hygiene and Svenska Cellulosa Aktiebolaget SCA. and Health AB, Edet Bruk, Lilla Edet. Former President of NetCom ASA 2001–2005 and President of Midelfart & Co AS 1995–2000. Member of the Swedish Trade Union Former member of the Boards of Cable & Confederation (LO). Wireless Plc, AB Electrolux, Orkla ASA, Former member of the Board of Tandberg ASA and Telenor ASA. Svenska Cellulosa Aktiebolaget Elected: 2016 SCA. Independent of the company, corporate Appointed: 2017 management and Essity’s major shareholders. Own shareholdings and those of Own shareholdings and those of related persons, Class B shares: 112 related persons: 0

Magnus Groth (1963) Niclas Thulin (1976) MBA and MSc ME IT Specialist Collaboration & President and CEO of Essity. Workplace at Essity Hygiene & Health AB, Gothenburg Former President and CEO of SCA 2015–2017, former President of SCA Consumer Goods Member of the Council for Europe 2011–2015. President of Studsvik AB Negotiation and Cooperation (PTK). (publ) 2006–2011 and SVP of Vattenfall Appointed: 2017 2001–2005. Former member of the Board of Own shareholdings and those of Acando AB, Svenska Cellulosa Aktiebolaget related persons: 0 SCA and Studsvik. Elected: 2016 Independent of Essity’s major shareholders. Own shareholdings and those of related persons, Class B shares: 48,900

Deputies Auditors Secretary to the Board

Niklas Engdahl (1980) Andreas Larsson (1989) Ernst & Young AB Mikael Schmidt (1960) Employed at Essity Hygiene and Health AB, Lilla Edet Employed at Essity Hygiene and Health AB, Senior Auditor: Hamish Mabon, Master of Laws Member of the Council for Negotiation and Gothenburg Authorized Public Accountant Senior Vice President, Group Function Cooperation (PTK). Member of the Council for Negotiation and Own shareholdings and those of Legal Affairs, General Counsel Appointed: 2017 Cooperation (PTK). related persons: 0 Employed since: 1992 Own shareholdings and those of related persons: 0 Appointed: 2018 Own shareholdings and those of Own shareholdings and those of related related persons, Class B shares: Martin Ericsson (1968) persons, Class B shares: 1,420 27,000 Employed at Essity Hygiene and Health AB, Falkenberg Member of the Council for Negotiation and Cooperation (PTK). Appointed: 2017 Own shareholdings and those of related persons, Class A shares: 200, Class B shares: 200

Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2019.

Essity’s Annual and Sustainability Report 2019 53 Corporate Governance Report – Executive Management Team

Executive Management Team

Magnus Groth (1963) Fredrik Rystedt (1963) President and CEO CFO and Executive Vice President, MBA and MSc ME Head of Group Function Finance Employed since: 2011 MSc Econ. Own shareholdings and those of related Employed since: 2014 persons, Class B shares: 48,900 Own shareholdings and those of related persons, Class B shares: 18,800

Joséphine Edwall Björklund (1964) Pablo Fuentes (1973) Senior Vice President, Group Function President, Latin America Communications MSc, MBA University Degree in Communications Employed since: 2006 Employed since: 2012 Individuals’ own and related parties’ Own shareholdings and those of related ­shareholdings Essity ADR: 9,606 ­persons, Class B shares: 9,225 Own shareholdings and those of related persons, Class B shares: 6,948

Donato Giorgio (1973) Ulrika Kolsrud (1970) President, Global Manufacturing President, Health and Medical Solutions Master in Mechanical Engineering MSc Eng. Employed since: 2009 Employed since: 1995 Own shareholdings and those of related Own shareholdings and those of related persons, Class B shares: 8,507 persons, Class B shares: 7,003

Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2019.

54 Essity’s Annual and Sustainability Report 2019 Corporate Governance Report – Executive Management Team

Don Lewis (1961) Mikael Schmidt (1960) President, Professional Hygiene Senior Vice President, Group Function BSc BA Legal Affairs, General Counsel and Secretary to the Board Employed since: 2002 Master of Laws Own shareholdings and those of related persons Essity ADR: 22,127 Employed since: 1992 Own shareholdings and those of related persons, Class B shares: 27,000

Robert Sjöström (1964) Tuomas Yrjölä (1978) President, Global Operational Services President, Global Brand, Innovation and MSc Econ, MBA Sustainability Employed since: 2009 MSc Econ, BA Own shareholdings and those of related Employed since: 2014 ­persons, Class B shares: 22,000 Own shareholdings and those of related persons, Class B shares: 6,395

Anna Sävinger Åslund (1969) Volker Zöller (1967) Senior Vice President, Group Function President, Consumer Goods Human Resources BSc BA BSc Human Resources Employed since: 1994 Employed since: 2001 Own shareholdings and those of related Own shareholdings and those of related ­persons, Class B shares: 9,975 ­persons, Class B shares: 5,685

Information regarding own shareholdings and those of related persons pertains to the situation on December 31, 2019.

Essity’s Annual and Sustainability Report 2019 55