Corporate Governance Report 2018

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, custom- ers, 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 2018 Annual Report. The report has been reviewed by the company’s auditors.

Corporate governance, including Swedish Code of Corporate Governance Sustainability remuneration, pages 46–55. 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 The company’s sustainability report Group’s corporate governance and the Risk management, pages 33–38 forms part of the Board of Directors’ company’s management structure and Essity’s processes to identify and man- Report. The sustainability work helps organization. It also 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 regard- Group-wide level. The section dealing and investors, and contributes toward a ing remuneration and remuneration with risk management describes the more sustainable world. issues and Essity’s internal control are most significant risks and procedures also 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 6. Remuneration shareholders are entitled to attend, to 5. Audit Committee 4. Board of Directors have a matter considered and to vote for Committee all shares held by the shareholder. The 7. Internal audit company’s Board of Directors and auditor 8. President and CEO are elected at the Annual General Meeting 8. Executive (AGM). The AGM also resolves on the Management Team remuneration of the Board members and determines guidelines for the remuneration 9. Business units and global units of senior executives. Essity has two listed classes of shares: Class A and Class B shares. Every Class A share represents ten Board’s and President’s administration. The Board of Directors also includes three votes while every Class B share represents The auditor submits an audit report from employee representatives with deputies, one vote. There are no other restrictions on this review. who are appointed by the respective voting rights in respect of shares used by The audit is performed in accordance employee organizations under Swedish law. shareholders at the general shareholders with the Swedish Companies Act, Inter- Essity’s Articles of Association contain no meeting. 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 2018 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. consolidated financial statements and the than twelve members elected by the AGM.

46 Essity’s Annual and Sustainability Report 2018 Corporate Governance Report – Corporate governance

5. Audit Committee sales, sourcing, financial reporting, IT sys- established objectives and strategies, a The role of the Audit Committee, without tems, HR issues, various types of projects process that is also centrally coordinated. prejudice to the Board of Director’s respon- and compliance with Essity’s internal rules, The business units are responsible for their sibility and other duties, is to monitor the including the company’s Code of Conduct. operating results, capital and cash flow. The company’s financial reporting and provide The internal audit also offers internal con- business and earnings position is followed recommendations and proposals to ensure sultancy services in connection with inter- up by the entire Executive Management the reliability of reporting. With regard to nal control matters and risk management. Team on a monthly basis. Each quarter, the financial reporting, the Committee business review meetings are conducted overseas the effectiveness of the compa- 8. President and Executive during which the management of each ny’s internal control, internal audit and risk Management Team business unit personally meets with the management. The Audit Committee keeps Essity’s President and CEO is responsible President and the CFO. These meetings itself continuously informed about the for and manages the day-to-day adminis- function as a complement to the daily mon- audit of the annual report and consolidated tration of the Group and follows the Board’s itoring of operations. Through working pro- financial statements and where applicable guidelines and instructions. The President cedures and terms of reference, a number about the conclusions of the quality control and CEO is supported by the Executive of issues of material significance are placed by the Swedish Inspectorate of Auditors Management Team, see pages 54–55, the under the control of the CEO and the com- concerning the company’s external auditor. work of which is led by the President. The pany’s Board of Directors. Essity reports The Committee receives and addresses the Executive Management Team comprises its operations according to three business supplementary report to the audit report the President, four Group Function Senior areas: Personal Care, Consumer Tissue and concerning the conducted audit that the Vice Presidents, four Business Unit Presi- Professional Hygiene. auditor submits in accordance with the EU dents and the Presidents of the three global Audit Regulation and Directive. The Audit units. The working procedures for the Committee informs the Board of its obser- Board of Directors and terms of reference Rules and regulations vations and the results of the audit. The issued by the Board of Directors to the Certain internal rules and regulations Audit Committee also examines and mon- President detail, for example, the division • Articles of Association Working procedures of the Board of itors the impartiality and independence of work between the Board and President. • Directors, including instructions for the of the auditor. In respect to this, particular In consultation with the Chairman and Sec- Audit Committee and the Remuneration attention is paid to whether the auditor is retary of the Board, the President prepares Committee providing the company with services other documentation and decision data for the • Terms of reference issued by the Board to the President than auditing services. The Committee Board’s work. • Code of Conduct also assesses the work of the auditor and • Policy documents and instructions (in provides proposals to the company’s 9. Business units and global units: areas such as finance, human resources, Nomination Committee concerning the Business units: sustainability, internal control, commu- nication, pension and risk management appointment of auditor for the following • Consumer Goods, which offers consumer as well as for specific issues, such as mandate period. tissue, baby care and feminine care in the processing of personal data, insider Members of the Audit Committee are Europe, the Middle East and Africa. issues, conflicts of interest, competition not employed by the company and at least • Health and Medical Solutions, which law, corruption and diversity) one member has accounting or auditing offers incontinence products in Europe, Certain external rules and regulations expertise. North America, the Middle East and • The Swedish Companies Act • The Swedish Annual Accounts Act Africa and medical solutions in Asia, • International Financial Reporting 6. Remuneration Committee Europe, North America, the Middle East Standards (IFRS) The Remuneration Committee drafts and Africa. • EU Market Abuse Regulation (MAR) Nasdaq Stockholm’s rules for issuers the Board’s motions on issues relating to Latin America, which offers consumer • • • Swedish Code of Corporate Governance remuneration principles, remuneration and tissue, baby care, incontinence products, Compliance with stock market regulations other terms and conditions of employment medical solutions, feminine care and • Essity complies with rules that apply in for the President and is authorized to make professional hygiene in Latin America. Sweden for listed companies and was decisions in these matters for the com- • Professional Hygiene, which offers not sanctioned by Finansinspektionen, pany’s other senior executives. The Com- professional hygiene in Europe, North the stock exchange’s disciplinary board or any other authority or self-regulating mittee monitors and assesses programs America, the Middle East and Africa. body for violations of the rules concern- for variable remuneration, the application Global units: ing the stock market. of the AGM’s resolution on guidelines for • Global Brand, Innovation and Sustaina remuneration of senior executives and the bility has global responsibility for cus- applicable remuneration structure and tomer and consumer brands, innovation More detailed information about remuneration levels in the Group. and sustainability and public affairs. Essity’s corporate governance is • Global Manufacturing has global respon- available on www.essity.com 7. Internal audit sibility for production and technology • Articles of Association The internal audit assesses and improves concerning all product categories with • Swedish Code of Corporate Governance the effectiveness of Essity’s internal gover- the exception of medical solutions. • Information from the Nomination Committee ahead of the 2019 Annual nance and control as well as risk manage- Global Operational Services has global • General Meeting (composition, propos- ment. The internal audit reports to the Audit responsibility for sourcing, logistics, als and work) Committee and the Board in relation to business services, IT and digitalization. • Other information ahead of the 2019 internal audit issues. The internal auditors Essity’s business units adhere to the princi- Annual General Meeting (notice, Board proposal for principles for remuneration ple of distinct decentralization of responsi- are geographically located throughout the of senior executives, information about world where Essity conducts operations. bility and authority. The business units are routines for notifying attendance at the The internal audit examines, among other fully responsible for managing and deve- Meeting, etc.). aspects, Essity’s internal processes for loping their respective operations through

Essity’s Annual and Sustainability Report 2018 47 Corporate Governance Report – Corporate governance

Activities during the year

Annual General Meeting members from among the next largest Composition of the Nomination Essity held its AGM in Stockholm on shareholders in terms of voting rights. Committee for the 2019 AGM Thursday, April 12, 2018. The total number of members shall be The composition of the Nomination The AGM elected the company’s Board of not more than seven. In the event that a Committee for the 2019 AGM is as follows: 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 • Petter Johnsen, Norges Bank Investment were adopted, see page 50 and Note C3 it would be beneficial for a replacement Management on pages 80–82. 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 • Marianne Nilsson, Swedbank Robur Under the Swedish Corporate Governance the largest shareholders in terms of voting Funds Code, a company listed on Nasdaq Stock- rights, by the next largest shareholder in • Pär Boman, Chairman of the Board, Essity holm shall have a nomination committee, terms of voting rights. Changes to the com- the purpose of which is to make proposals position of the Nomination Committee are All shareholders have had an opportunity to the AGM in respect of the election of to be disclosed immediately. to submit proposals to the Nomination the Chairman of the Meeting, Board of The composition of the Nomination Committee. The Nomination Committee’s Directors, Chairman of the Board and audi- Committee is to be announced by Essity proposal for the 2019 AGM is presented in tor, remuneration of each Board Member no later than six months prior to the AGM. the notice convening the AGM available on (divided between the Chairman of the No remuneration is to be paid to the mem- Essity’s website www.essity.com. The 2019 Board and other Board Members), remuner- bers of the Nomination Committee. Any AGM will be held on Thursday, April 4, see ation of the auditor, and where applicable, expenses incurred during the work of the page 8. proposals for amendments to the instruc- Nomination Committee are to be paid by The Nomination Committee was con- tion for the Nomination Committee. At the Essity. The mandate period of the Nomina- vened on four occasions prior to the 2019 2017 AGM, the following instructions to the tion Committee extends until the compo- AGM. The Chairman of the Board presented Nomination Committee were adopted to sition of the next Nomination Committee is the Board evaluation and provided the apply until further notice: disclosed. The Nomination Committee is to Nomination Committee with information “The Nomination Committee is to com- submit proposals relating to the Chairman regarding Board and committee work prise representatives of the four largest of the Meeting, the Board of Directors, the during the year. When preparing proposals shareholders in terms of voting rights as Chairman of the Board, Board fees for the for the Board for the 2019 AGM, particular per the shareholders’ register maintained Chairman of the Board and each of the attention has been paid to the issues of by the company on the final banking day other Board members, including remuner- diversity and an even gender distribution, of August, as well as the Chairman of the ation for committee work, the company’s and the Nomination Committee thus Board, who also convenes the first meeting auditor and auditor’s fees, and to the extent applied Item 4.1 of the Swedish Corporate of the Nomination Committee. The mem- deemed necessary, proposals for amend- Governance Code as its diversity policy. ber representing the largest shareholder ments to this instruction.” The aim was to retain gender balance in terms of votes is to be appointed as In its work, the Nomination Committee is on both the Board and the Board’s com- Chairman of the Nomination Committee. to consider the rules that apply to the inde- mittees. When preparing its proposal for The Chairman of the Board shall not be pendence of Board members, as well as the the election of auditors, the Nomination Chairman of the Nomination Committee. requirement of diversity and breadth with Committee also gave consideration to the If necessary, due to subsequent ownership the endeavor to achieve an even gender recommendation of the Audit Committee. changes, the Nomination Committee is distribution and that the selection shall be entitled to call on one or two additional based on expertise and experience relevant to Essity.

Board of Directors and committees Composition of the largest Committees Attendance1) shareholders, Nomination Committee Board of Audit at August 31, 2018 (share of votes) Depend- Remuner- Directors Committee Remuneration Board of Directors Elected ence Audit ation (11) (6) Committee (4) % Ewa Björling 2016 11/11 AB Industrivärden 29.8 Pär Boman 2016 x Chairman 11/11 6/6 4/4 Norges Bank Investment Management 8.2 Maija-Liisa Friman 2016 11/11 Handelsbanken’s foundations, etc. 3.8 Annemarie Gardshol 2016 11/11 MFS Investment Management 2.7 Magnus Groth 2016 11/11 Swedbank Robur Funds 2.6 Bert Nordberg 2016 x x 11/11 6/6 4/4 Louise Svanberg 2016 x 10/11 4/4 Lars Rebien Sørensen 2017 10/11 Barbara Milian Thoralfsson 2016 Chairman 11/11 6/6 1) Board meetings January 1–December 31, 2018. = Dependent in relation to the company’s major shareholder, AB Industrivärden. = President of Essity, dependent in relation to the company and the Executive Management Team.

48 Essity’s Annual and Sustainability Report 2018 Corporate Governance Report – Corporate governance

Board of Directors In 2018, the Board of Directors has — in mainly concerned remuneration and Essity’s Board of Directors comprises nine addition to the customary work of the other employment terms and conditions members elected by the AGM. Board — focused on the integration of BSN for senior executives, and current remuner- Ewa Björling, Pär Boman, Maija-Liisa medical and on issues within the scope ation structures and remuneration levels Friman, Annemarie Gardshol, Magnus of ongoing efficiency improvement and in the Group. Groth, Bert Nordberg, Louise Svanberg, profitability programs, such as Cure or Kill Lars Rebien Sørensen and Barbara Milian and Tissue Roadmap. During the autumn, Internal audit Thoralfsson were elected as Board mem- the Board of Directors also focused on The basis of the work of the internal audit bers in 2018. Pär Boman was elected as the strategy work and issues in connection with is a risk analysis conducted in cooperation Chairman of the Board. the cost-savings program presented by the with Essity’s management team. The risk The independence of Board members is company on September 28, in light of the analysis concludes in an audit plan, which presented in the table on page 48. Essity market situation, raised raw material and is presented to the Audit Committee. In complies with the requirements of the energy costs and events in the business 2018, 117 audit projects were performed Swedish Corporate Governance Code that environment. and reported at meetings with the Audit stipulate that not more than one member Committee. elected by the AGM shall be a member of Evaluation of the Board’s work Work in 2018 involved follow-up of the company management, that the majority of The work of the Board, like that of the units’ progress with process-based control, the members elected by the AGM shall be President and the Chairman, is evaluated follow-up of the efficiency in internal independent of the company and company annually using a systematic and structured governance and control, and follow-up management, and that not fewer than two process. The purpose of this work is to of compliance with Essity’s policies. of these shall also be independent of the obtain a sound basis for the Board’s own company’s major shareholders. All of the development work and to provide the Nom- External auditor AGM-elected Board members have experi- ination Committee with decision data for The 2018 Annual General Meeting ence of the requirements incumbent upon its nomination work. External expertise was appointed the accounting firm of Ernst & a listed company. Five of the Board mem- used. The evaluation took the form of an Young AB as the company’s auditor for a bers are women, corresponding to 55% of anonymous questionnaire and interviews mandate period of one year. The account- the total number of AGM-elected Board as well as group and individual discussions. ing firm notified the company that Hamish members. The employees have appointed The evaluation covers such areas as the Mabon, Authorized Public Accountant, Tina Elvingsson Engfors, Örjan Svensson Board’s methods of work, effectiveness, would be the auditor in charge. Hamish and Niclas Thulin as representatives to the expertise and the year’s work. The Board Mabon is also the auditor for Svenska Board for the period until the 2019 AGM, was provided with feedback after the Cellulosa Aktiebolaget SCA, Skanska AB, and their deputies Niklas Engdahl, Martin results were compiled. The Nomination AB Tetra Pak and Husqvarna AB, among Ericsson and Andreas Larsson. Committee was also informed of the other companies. He owns no shares in results of the evaluation. the company. Board activities In accordance with its formal work plan, In 2018, the Board was convened 11 times. Audit Committee the Board met with the auditors at two The Board has fixed working procedures The Audit Committee comprises Chairman scheduled Board meetings in 2018. The that describe in detail which ordinary Barbara Milian Thoralfsson, Pär Boman and auditor also attended each meeting of the agenda items are to be addressed at Bert Nordberg. The Audit Committee held Audit Committee. At these meetings, the the various Board meetings of the year. six meetings during the year. In addition, auditor presented and received opinions Recurring agenda items are finances, the members have also held meetings with on the focus and scope of the planned market situation, investments and adoption internal audit, the auditors and the CFO, audit and delivered verbal audit and review of the financial reports. The Board also and held meetings with the auditors and reports. Furthermore, at the Board’s third establishes and evaluates the company’s CFOs of large partly-owned companies. In scheduled autumn meeting, the auditor overall targets and strategy and decides on its monitoring of the financial reporting, the delivered an in-depth verbal report on the significant internal rules. Another key task is Committee dealt with relevant accounting audit for the year. The working procedures to continuously monitor the internal control issues, internal auditors’ reviews, auditing specify a number of mandatory issues that of the compliance of the company and work, a review of various measurement must be addressed. These include matters its employees with relevant internal and issues, such as testing of impairment of importance that have been a cause for external rules, and that the company has requirements for goodwill, and the pre- concern or discussion during the audit, well-functioning procedures for market dis- conditions for the year’s pension liability business routines and transactions where closures. On a regular basis throughout the calculations. The Audit Committee also differences of opinion may exist regarding year, the Board has also dealt with reports prepared a recommendation to be used by the choice of accounting methods. The from the Audit and Remuneration Com- the Nomination Committee when deciding auditor shall also disclose consultancy mittees and reports on strategy, market, on its proposal to the AGM regarding the work conducted for Essity as well as other internal audit, internal control and financial election of auditors. dependencies in relation to the company operations. The company’s auditor regu- and its management. On each occasion, larly present a report on its audit work and Remuneration Committee Board members have had an opportunity these issues are discussed by the Board. The Remuneration Committee comprises to ask the auditors questions. Certain parts The Business Unit Presidents present their Chairman Pär Boman, Bert Nordberg and of the detailed discussion on the accounts respective operations and current issues Louise Svanberg. The Remuneration Com- take place without representatives of com- affecting them. mittee held four meetings in 2018. Activities pany management being present.

Essity’s Annual and Sustainability Report 2018 49 Corporate Governance Report – Corporate governance

Remuneration, Management and Board of Directors

Guidelines Variable remuneration and The 2018 AGM adopted guidelines for strategic targets remuneration of senior executives that are Programs for variable remuneration are based on a total remuneration package formulated to support the Group’s stra- comprising a fixed salary, variable salary tegic targets. The short-term program is and other benefits, and a pension; see individually adapted and based mainly on Note C3 on pages 80-82. Corresponding cash flow, EBITA margin and organic sales guidelines have been proposed to the growth. The long-term program is based 2019 AGM, see page 29. on the Essity share’s long-term total shareholder return. Remuneration of the President and other senior executives Remuneration of the Board Remuneration of the President and other The total remuneration of the AGM- senior executives is presented in Note C3 elected Board members amounted on pages 80–82. Variable remuneration for to SEK 8,642,000 in accordance with the President, CFO and Business Unit Pres- the AGM’s resolution. See Note C4 on idents was maximized to a total of 100% of page 82 for further information. the fixed salary for 2018. For two Business Unit Presidents, stationed in Latin America and the US, the maximum outcome is 110– 130%. The corresponding limit for other senior executives was 90% in 2018.

50 Essity’s Annual and Sustainability Report 2018 Corporate Governance Report – Corporate governance

Internal control and financial reporting

The Board’s responsibility for internal External financial reporting necessary control measures with respect governance and control is regulated in The quality of external financial reporting to financial reporting. An important role the Swedish Companies Act, the Annual is guaranteed via a number of actions and is played by the business unit’s controller Accounts Act and the Swedish Corporate procedures. The President is responsible organizations, which are responsible for Governance Code. The Annual Accounts for ensuring that all information issued, ensuring that financial reporting from Act requires that the company, each year, such as press releases with financial con- each unit is correct, complete and deliv- describes its system for internal control tent, presentation material for meetings ered in a timely manner. In addition, each and risk management with respect to with the media, owners and financial insti- business unit has a Finance Manager with financial reporting. The Board bears the tutions, is correct and of a high quality. The responsibility for the individual business overall responsibility for financial report- responsibilities of the company’s auditors unit’s financial statements. The company’s ing and its working procedures regulate include reviewing accounting issues that control activities are supported by the the internal division of work between the are critical for the financial reporting and budgets prepared by each business unit Board and its committees. reporting their observations to the Audit and updated during the year through The Audit Committee has the important Committee and the Board of Directors. continuous forecasts. task of preparing the Board’s work to In addition to the audit of the annual Essity has a standardized system of assure the quality of financial reporting. accounts, a review of the half-year report control measures involving processes that This preparation work includes issues and of the company’s administration and are significant to the company’s financial relating to internal control and regulation internal control is carried out. reporting. The controls are adapted to the compliance, control of recognized val- operational process and system structure ues, estimations, assessments and other Risk management of each unit. Accordingly, each unit pre- activities that may impact the quality of With regard to financial reporting, the risk pares a record of the actual controls to be the financial reports. The Committee has that material errors may be made when carried out in the unit in question. Control charged the company’s auditor with the reporting the company’s financial position of these processes is assessed through task of specifically examining the degree and results is considered the primary self-evaluation followed up by an internal of compliance in the company with the risk. To minimize this risk, control docu- audit. In some cases, Essity has enlisted rules for internal control, both general ments have been established pertaining external help to validate these controls. and detailed. to accounting, procedures for annual Financial results are reported and exam- accounts and follow-up of reported annual ined regularly within the management Financial reporting to the Board accounts. There is also a joint system for teams of the operating units and commu- The Board’s working procedures stipu- reporting annual accounts. Essity’s Board nicated to Essity’s management at monthly late which reports and information of a of Directors and management assess the and quarterly meetings. Before reports financial nature are to be submitted to financial reporting from a risk perspective are issued, results are analyzed to identify the Board at each scheduled meeting. on an ongoing basis. To provide support and eliminate any mistakes in the process The President, together with the Chair- for this assessment, the company’s income until the year-end closing. For additional man, ensures that the Board receives statement and balance sheet items are information, see the Internal audit section the reports required to enable the Board compared with earlier reports, budgets on page 49. to continuously assess the company’s and other planned figures. Control activi- The Board follows up to ensure that the and Group’s financial position. Detailed ties that are significant to financial report- internal control and reporting to the Board instructions specifically outline the types ing are carried out using the company’s functions through continuous reporting of reports that the Board is to receive at IT system. For further information, see from the President and CFO and through each meeting. the Risk and risk management section on reporting from the internal audit unit in pages 33–38. the scope of the audit plan set annually. Internal reporting Internal audit also continuously reports For a number of years now, Essity has used Control activities and follow-up its observations in this respect to the a shared reporting system for financial Significant instructions and guidelines Audit Committee. Internal audit’s tasks reports. An increasing number of units related to financial reporting are prepared include following up compliance with the within Essity are also introducing the same and updated regularly by the Group Func- company’s internal rules, and the results accounting system based on a common tion Finance and are easily accessible on of this follow-up are reported to the Board IT platform. the Group’s intranet. The Group Function through the Audit Committee. Accounting and reporting for several Finance is responsible for ensuring com- units are, to a certain extent, conducted pliance with instructions and guidelines. in Shared Service Centers. Reporting is Process managers at various levels within therefore more efficient and uniform. Essity are responsible for carrying out the

Essity’s Annual and Sustainability Report 2018 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) Maija-Liisa Friman (1952) Engineering and Business Administration Med. Dr. Sci. and Associate Professor from MSc Eng. degrees Karolinska Institutet. Member of the Boards of Finnair, the Securities Chairman of the Board since 2016. Chairman of the Board of The Swedish Market Association and Boardman Oy. Chairman of the Board of Svenska Petroleum & Biofuels Institute (SPBI). Member Former Chairman of Helsinki Deaconess Handelsbanken AB and Svenska Cellulosa of the boards of Biogaia AB and Mobilaris AB. Institute, Vice Chairman of Neste Corporation, Aktiebolaget SCA, Deputy Chairman of the Former member of the Boards of the Swedish member of the Boards of TeliaSonera, Board of AB Industrivärden and member of National Insurance Office and the Swedish Rautaruukki, Metso, Ekokem and Talvivaara the Board of Skanska AB. International Development Cooperation Mining Company Plc. Agency (SIDA). 2006–2015 President of Handelsbanken Former CEO of Aspocomp Group Plc Minister for Trade 2007–2014, and Minister for Elected: 2016 (elected in SCA 2010) 2004–2007 and President of Vattenfall Oy Nordic Cooperation 2010–2014. Previously and Gyproc Oy. Independent of the company and corporate Karolinska Institutet. Elected: 2016 (elected in SCA 2016) management. Elected: 2016 (elected in SCA 2016) Class B shares: 3,000 Independent of the company, corporate Independent of the company, corporate management and Essity’s major shareholders. management and Essity’s major shareholders.

Annemarie Gardshol (1967) Bert Nordberg (1956) Louise Svanberg (1958) MSc Eng. Engineer MSc Econ. Member of the Board of Svenska Cellulosa Chairman of the Board of Vestas Wind Member of the boards of Dana Farber Aktiebolaget SCA. Systems A/S. Member of the Boards of AB Cancer Institute, Boston and CERAS Health, President of PostNord Sverige AB, member Electrolux, Svenska Cellulosa Aktiebolaget New York. of PostNord’s corporate management team SCA and SAAB. Previously held various management since 2012. Previously held various management posi- positions in EF Education First, including Former member of the Boards of Etac AB, tions in Digital Equipment Corp. and Ericsson, President 2002–2008 and Chairman of the Bygghemma AB, Ortivus and Semcon. President of Sony Mobile Communications Board 2008–2010. Former member of the Former President of PostNord Strålfors Group AB 2009-2012. Former Chairman of the Board Board of Careers Australia Group Ltd. AB and various management positions in of Sony Mobile Communications and mem- Elected: 2016 (elected in SCA 2012) Gambro AB and McKinsey & Company. ber of the Boards of BlackBerry Ltd, Skistar AB and Axis AB. Independent of the company, corporate Elected: 2016 (elected in SCA 2015) management and Essity’s major Elected: 2016 (elected in SCA 2012) Independent of the company, corporate shareholders. management and Essity’s major shareholders. Independent of the company, corporate Class B shares: 15,000 management and Essity’s major Class B shares: 1,500 shareholders. Class B shares: 16,800

52 Essity’s Annual and Sustainability Report 2018 Corporate Governance Report – Board of Directors and Auditors

Lars Rebien Sørensen (1954) Barbara Milian Thoralfsson (1959) Magnus Groth (1963) BSc Forestry and MSc Econ. MBA, BA MBA and MSc ME Deputy Chairman of the Board of Carlsberg Member of the Board of Hilti AG, G4S Plc President and CEO of Essity. A/S. Member of the Boards of Jungbunzlauer, and Svenska Cellulosa Aktiebolaget SCA. Member of the Board of Acando AB. Novo Holding A/S, Novo Nordisk Foundation Former President of NetCom ASA 2001–2005 and Thermo Fisher Scientific Inc. Former President and CEO of SCA 2015–2017, and President of Midelfart & Co AS 1995– former President of SCA Consumer Goods Former President and CEO of Novo Nordisk 2000. Former member of the Boards of Europe 2011–2015. President of Studsvik AB 2000–2017. Cable & Wireless Plc, AB Electrolux, Orkla (publ) 2006–2011 and SVP of Vattenfall Elected: 2017 ASA, Tandberg ASA and Telenor ASA. 2001–2005. Independent of the company, corporate Elected: 2016 (elected in SCA 2006) Elected: 2016 (elected in SCA 2015) management and Essity’s major Independent of the company, corporate Independent of Essity’s major shareholders. shareholders. management and Essity’s major shareholders. Class B shares: 43,500

Appointed by the employees Deputies

Niklas Engdahl (1980) Employed at Essity Hygiene and Health AB, Lilla Edet Member of the Council for Negotiation and Cooperation (PTK). Appointed: 2017

Martin Ericsson (1968) Employed at Essity Hygiene and Health AB, Falkenberg Member of the Council for Negotiation and Cooperation (PTK). Appointed: 2017 Class A shares: 200 Class B shares: 200

Andreas Larsson (1989) Employed at Essity Hygiene and Health AB, Gothenburg Tina Elvingsson Engfors (1967) Örjan Svensson (1963) Niclas Thulin (1976) Member of the Council for Negotiation Operator at Essity Hygiene and Health AB, Senior Industrial Safety Representative IT Specialist Collaboration & and Cooperation (PTK). Falkenberg at Essity Hygiene and Health AB, Workplace at Essity Hygiene & Health AB, Appointed: 2018 Class B shares: 1,200 Member of the Swedish Trade Union Lilla Edet Gothenburg Confederation (LO). Member of the Swedish Trade Union Other current assignments: Limited Appointed: 2017 Confederation (LO). partner of TH Tryck & Reklam Auditors Kommanditbolag. Class B shares: 225 Appointed: 2017 (appointed in SCA 2005) Ernst & Young AB Class B shares: 75 Member of the Council for Negotiation and Cooperation (PTK). Senior Auditor: Hamish Mabon, Authorized Public Accountant Appointed: 2017 Secretary to the Board

Mikael Schmidt (1960) Master of Laws Senior Vice President, Group Function Legal Affairs, General Counsel Employed since: 1992 Information regarding individuals’ own and related parties’ shareholdings pertains to the situation on December 31, 2018. Class B shares: 24,000

Essity’s Annual and Sustainability Report 2018 53 Corporate Governance Report – Executive Management Team

Executive Management Team

Magnus Groth (1963) Fredrik Rystedt (1963) Joséphine Edwall Björklund (1964) President and CEO CFO and Executive Vice President, Senior Vice President, Group Function MBA and MSc ME Head of Group Function Finance Communications Employed since: 2011 MSc Econ. University Degree in Communications Class B shares: 43,500 Employed since: 2014 Employed since: 2012 Class B shares: 16,200 Class B shares: 7,950

Pablo Fuentes (1973) Donato Giorgio (1973) Ulrika Kolsrud (1970) President, Latin America President, Global Manufacturing President, Health and Medical Solutions MSc, MBA Master in Mechanical Engineering MSc Eng. Employed since: 2006 Employed since: 2009 Employed since: 1995 Essity ADR: 6,169 Class B shares: 6,472 Class B shares: 5,403 Class B shares: 9,448

54 Essity’s Annual and Sustainability Report 2018 Corporate Governance Report – Executive Management Team

Don Lewis (1961) Mikael Schmidt (1960) Robert Sjöström (1964) President, Professional Hygiene Senior Vice President, Group Function President, Global Operational Services BSc BA Legal Affairs, General Counsel and Secretary MSc Econ, MBA to the Board Employed since: 2002 Employed since: 2009 Master of Laws Essity ADR: 20,506 Class B shares: 19,000 Employed since: 1992 Class B shares: 24,000

Tuomas Yrjölä (1978) Anna Sävinger Åslund (1969) Volker Zöller (1967) President, Global Brand, Innovation and Senior Vice President, Group Function President, Consumer Goods Sustainability Human Resources BSc BA MSc Econ, BA BSc Human Resources Employed since: 1994 Employed since: 2014 Employed since: 2001 Class B shares: 7,875 Class B shares: 4,941 Class B shares: 4,535

Information regarding individuals’ own and related parties’ shareholdings pertains to the situation on December 31, 2018.

Essity’s Annual and Sustainability Report 2018 55