Nordic Morning Plc is a Finnish public limited company that is 100 percent owned by the Finnish state. Its corporate governance system complies with the laws of Finland, Nordic Morning’s Articles of Association, and the corporate governance code concerning publicly listed companies.

The Nordic Morning Group comprises the parent company, Nordic Morning Plc, and its subsidiaries.

Governing bodies

Responsibility for the Nordic Morning Group’s governance and operations rests with Nordic Morning Plc’s governing bodies, which consist of the General Meeting of Shareholders, the Board of Directors, and the CEO. Group management is the responsibility of the Group Management Team, which directs, guides, develops, and supervises the operations of the Group companies. The management of the subsidiaries is under the control the vice presidents responsible for the business areas. Nordic Morning Plc directs and implements the Group’s financial administration, HR and information management and communications strategies.

General Meeting of Shareholders

Nordic Morning Plc’s supreme decision-making body is the General Meeting of Shareholders, which convenes at least once a year. An Annual General Meeting is held before the end of May on a date set by the Board of Directors. The General Meeting makes decisions on the matters specified in the Limited Liability Companies Act and the Articles of Association, such as the acceptance of the financial statements, the distribution of dividends, the election of the Board of Directors and the auditor, and the compensation payable to them.

Board of Directors

The Annual General Meeting elects between four and eight directors to the Board of Directors for a term of one year. The members of the Board of Directors must be suitable for their task, and the election of board members complies with the Finnish Government’s principles regarding equal representation of the sexes. Their term expires at the end of the Annual General Meeting that first follows their election. The Chairman and Vice-Chairman of the Board are elected by the General Meeting of Shareholders.

The Board of Directors is responsible for the company’s management and for the appropriate organization and supervision of the company’s assets and business operations. The board makes all major decisions on operating policies, strategies, capital expenditure, organization, and funding, and decides on all major transactions concerning properties, operations, and companies. The board approves the company’s values and policies, and oversees their application in practice.

The board approves its own working procedure and meeting schedule. The board’s key functions are:

• approving the annual operating plan and budget
• approving the financial statements and the annual report
• approving the organization and compensation system
• appointing and compensating the CEO and the Group Management Team
• appointing committee members and approving their working procedures
• approving long-term objectives and strategies
• approving the Group’s values, and the principles and policies of its control and risk management system
• supervising the appropriate arrangement of accounting and financial management.

The Board of Directors has approved the essential principles to be applied throughout the Group, the purpose of which is to guarantee appropriate procedures in all Group operations. The board evaluates its working practices annually.

In 2015, the Board of Directors consisted of Jussi Lystimäki (Chairman), Anni Ronkainen (Vice-Chairman), and members Carina Brorman, Maritta Iso-Aho, Petri Vihervuori, and Anne Årneby. In 2015, the board convened 13 times. The average attendance rate was 95 percent. More detailed information is available in the annual report.

Board committees

The board committees assist the board by preparing the business to be handled by the board. In 2015, the board had one permanent committee, the Audit and Structure Committee.

Audit and Structure Committee

In accordance with its rules of procedure, the Audit and Structure Committee assists the board by monitoring the financial situation and performing supervisory tasks, directing reporting practices and internal audit functions, supervising risk management, and overseeing auditing. The Audit and Structure Committee directs the development of the Group’s structure and key business areas. The committee also prepares matters relating to executive appointments, the terms and conditions of corporate executives’ contracts, their salaries, compensation systems, and principles of compensation.

In 2015, the Audit and Structure Committee consisted of four members: Jussi Lystimäki (Chairman), Maritta Iso-Aho, Carina Brorman, and Petri Vihervuori. The committee convened four times, with an attendance rate of 93 percent.

CEO

The Board of Directors appoints the CEO, who is responsible for managing and developing the Group’s operations in accordance with the provisions and guidelines laid down in the Limited Liability Companies Act and the Articles of Association and as issued by the board. The CEO is responsible for ensuring the legality of the accounting and the reliability of asset management. The CEO is directly responsible for the following functions: implementation of the Group strategy, financial administration, general administration, the direction and supervision of the business areas, public and stakeholder relations, and the preparation of board meetings. The CEO regularly reports to the board on the Group’s operational performance and financial position.

Since August 8, 2005, the CEO of Nordic Morning Plc has been Timo Lepistö, LL.M., born in 1959.

Group Management Team

The Group Management Team comprises the CEO and, as appointed by the board on the basis of the Structure and Compensation Committee’s proposal, the Chief Financial Officer, the Human Resources Director, the Communications Director, and the Business Operations Directors. In 2015, the Group Management Team comprised Timo Lepistö, CEO; Heikki Autio, VP, Campaigns & Dialogue; Mattias Falkendal, VP, Visibility & Service Design; Päivi Hietanen, Managing Director, Edita Publishing Ltd; Annika Linna, VP, Communications; Kati Niemelä, CFO; Annika Parkkonen, VP, HR; and Christian Sahlgren, Managing Director, Sitrus Agency AB. More detailed information is available in the annual report.

The Management Team is responsible for making action plans to implement the Group strategy in the business units, for examining annual business plans and budgets, for monitoring profit performance and taking any measures needed to rectify poor performance, for coordinating and monitoring the implementation of investment plans, for overseeing the implementation of business restructuring, for supervising risk management, and for monitoring major day-to-day operating actions and decisions.

None of the Group Management Team members or those close to them has any significant business relationships with companies in the Nordic Morning Group.

Business areas

The Nordic Morning Group’s business is divided into three business areas: Visibility & Service Design, Content, and Campaigns & Dialogue.

Related party transactions

The related party transactions of the members of the Group’s Board of Directors, the members of the Group Management Team, and the Managing Directors of Group companies are surveyed annually.

In 2015, the members of the Board of Directors did not own any shares or share-based rights in the parent company or other Group companies. The Board of Directors assesses that all of its members are independent of the company and that all members except Petri Vihervuori are independent of the company’s sole shareholder, the Finnish state.

In 2015, the Group CEO and other members of the Group Management Team did not own any shares or share-based rights in the parent company or other Group companies.

In 2015, the Managing Directors of the Group’s subsidiaries, except Johan Boberg, Managing Director of Edita Bobergs AB, did not own any shares or share-based rights in the parent company or other Group companies.

Compensation

Nordic Morning Plc complies with the Ministerial Committee on Economic Policy statement on the remuneration and pension benefits of company management and key personnel, updated in August 2012.

Compensation of board members

The Annual General Meeting decides on the compensation of board members annually. Members of the board and its committees are remunerated financially. Members of the board are not entitled to incentive systems based on shares or share derivatives.

Compensation of the CEO and corporate executives

The compensation of the CEO and members of the Group Management Team consists of a fixed monthly salary, standard benefits, a performance-based bonus based on annually decided criteria that must be met for the bonus to be paid, and a long-term compensation system. Nordic Morning Plc does not use incentive systems based on shares or share derivatives.

The board of Nordic Morning Plc decides the terms and conditions of the contracts of the CEO and members of the Group Management Team. Every year the board sets targets, based on the budget and operating plans, that must be met for bonuses to be paid, and decides on the compensation of the CEO and members of the Group Management Team. As regards others than the CEO and members of the Group Management Team, the board decides on the principles of compensation.

The CEO is entitled to a performance-based bonus, which is no more than 40 percent of their annual taxable earnings. The members of the Group Management Team are entitled to a performance-based bonus, which is no more than 30 percent of their annual taxable earnings. The short-term performance-based bonus is tied to the operating profit and to personal targets.

The CEO and some members of the Group Management Team were included in the long-term “bonus bank” incentive system. The bonus bank system is used to reward the Group’s key personnel for reaching the targets approved annually by the board. The long-term performance-based bonus is tied to the long-term gross profit and operating profit of the Group. Under the system, the maximum annual bonus may not exceed 40 percent of the CEO’s annual taxable earnings or 30 percent of the annual taxable earnings of other key personnel. The bonuses accumulated in the new system can be withdrawn in stages over a three-year period starting from 2016.

Furthermore, the business areas can apply bonus systems based on sales or production, or linked to the units’ contributions to the profit margins or their earnings to facilitate business success. These systems do not overlap with the Group’s annual performance-based bonus system. Since October 2013, Nordic Morning has cooperated with Innova Oy in the development of the short-term performance-based bonus program.

Upon termination of their contracts, the CEO and other members of the Group Management Team will be entitled to the salary paid for the period of notice as well as benefits. The period of notice for terminating the CEO’s employment is six months when notice is served by the employer and four months when notice is served by the CEO. The period of notice for terminating the employment of other members of the Group Management Team is between six and 12 months when notice is served by the employer and between three and six months when notice is served by the corporate executive in question. Upon termination of employment by the employer, the CEO will be entitled to compensation equivalent to six months’ salary in addition to the salary paid for the period of notice, and other members of the Group Management Team will be entitled to compensation equivalent to up to six months’ salary in addition to the salary paid for the period of notice. Upon resignation, the corporate executive in question will only be entitled to the salary paid for the period of notice as well as benefits.

The CEO’s retirement age is 62. With the exception of the CEO and the Chief Financial Officer, Nordic Morning Plc does not provide supplementary pension insurance. The supplementary pension plans of the CEO and the Chief Financial Officer are based on contributions, and they include vested rights. For the other members of the Group Management Team, the legislation or prevailing practice of the country in question is applied.

Information on compensation in 2015 is available in the financial statements.

Internal control

The objective of internal control with regard to financial reporting is to ensure that the reporting is reliable and complies with generally accepted principles, applicable legislation, and regulations governing the preparation of financial statements. Financial reporting is based on internal instructions and financial processes.

The overall responsibility for the internal control of financial reporting lies with the Board of Directors. The Board of Directors evaluates the profitability of business operations. The Board of Directors has appointed an Audit and Structure Committee that assists the board in carrying out its supervisory duties. The management is responsible for compliance with procedures as part of internal control. The internal control of operations is based on supervision and control systems built into the management system.

The action plan, the regular reporting on which it is based, and the monthly financial reports are key practices that support management and internal control.

The achievement of financial targets and balance sheet management are monitored through monthly Group-wide reports. Interim financial statements are drawn up quarterly. A semi-annual review is drawn up together with the interim financial statements for the first half-year.

Corporate responsibility

Nordic Morning releases annual corporate responsibility reports prepared according to the GRI. The corporate responsibility program is based on the triple bottom line: financial, social, and environmental responsibility.

Risk management

The risk management policy approved by Nordic Morning Plc’s Board of Directors defines the risk management principles, objectives, and divisions of responsibility in the Group. Risk management is based on an organization-wide approach to identifying, assessing, managing, and monitoring material risks. The CEO and other executives ensure that risk management is a continuous, integral part of the Group’s day-to-day operations. The management reports to the board on risks by business area. The management reports to the Board of Directors on risks monthly on a running basis and prepares an in-depth risk analysis once a year. The CEO and other executives identify and monitor risks, develop and coordinate risk management activities, and update the Group’s risk profile. The Board of Directors deals with the most significant risks, and evaluates the efficiency of risk management at least once a year. The effectiveness of the Nordic Morning Group’s risk management is monitored through internal and external audits as part of the regular auditing program.

Auditing

The authorized public accountant firm elected by the Annual General Meeting to audit the parent company, Nordic Morning Plc, audits the entire Group with regard to accounting, financial statements, and administration each financial year. In addition to the audit report issued in connection with the company’s financial statements, the auditors also regularly report on their findings to the board and the board’s Audit and Structure Committee.

Nordic Morning Plc’s Auditor is KPMG Oy, with Minna Riihimäki, APA, acting as the auditor in charge in 2015.

Internal auditing

The purpose of internal control and risk management is to ensure that the company’s operations are efficient and profitable, that the supply of information is reliable, and that regulations and policies are observed. Internal auditors are responsible for helping the board and the CEO to assess the appropriateness and effectiveness of the Group’s processes and systems, the efficiency and adequacy of internal control, and the accuracy and adequacy of the accounting and reporting.

In the Nordic Morning Group, internal auditing goals are decided upon annually by the board by means of, for example, risk assessments. Practical implementation is entrusted to an independent external firm of authorized public accountants.

Internal audit reports are distributed to Nordic Morning Plc’s Board of Directors, Audit and Structure Committee, auditors, CEO, and Group Management Team. The CEO, together with other executives, is responsible for ensuring that any actions required on account of observations made by internal auditors are duly initiated.

Taking into consideration the size of the company and its level of internal control in 2015, the Board of Directors decided that no separate assignment concerning internal auditing would be made during the year.