UPM Annual Report 2018

First page Table of contents Previous page 84-85 Next page Last page

UPM AT A GLANCE

STRATEGY

BUSINESSES

SOCIETY AND ENVIRONMENT

GOVERNANCE AND COMPLIANCE

REPORT OF THE BOARD OF DIRECTORS

FINANCIAL STATEMENTS

AUDITOR’S REPORT

OTHER FINANCIAL INFORMATION

BOARD DIVERSITY – GENDER

Board diversity – age

Board diversity – nationality

Board diversity – tenure

Board diversity – education

BA (Business Econ.)

Ph.D. (Econ.)

Dutch

40–49

BA (Business Admin.)

B.Sc. (Econ.)

30% 70%

Norwegian

Ph.D. (Chem. Eng.) General Staff Officer M.Sc. (Eng.)

>10 years

M.Sc. (Econ.)

60–69

<5 years

Swiss

Finnish

LL.M.

50–59

MBA or Executive MBA

5–10 years

■ 20% ■ 30% ■ 50%

■ 70% ■ 10% ■ 10% ■ 10%

■ 40% ■ 20% ■ 40%

served as a non-executive director for 13 years and having played a part in UPM’s remarkable transformation from a global paper producer to a versatile Biofore company, she felt that the Board would benefit from some refreshment. We thank Wendy E. Lane sincerely for her valuable contribution in the company’s transformation. Following Ms Lane’s announcement that she would step down from the Board, the Nomination and Governance Committee started its annual review of the Board composition and assessment of the Board’s performance, effectiveness, competences, diversity and qualifications in relation to UPM’s strategy, business operations, risk management and governance needs, and decided to initiate a search for a new director candidate. Recognising the challenges related to the search for a new director and in order to widen its net in finding candidates who could meaningfully contribute to the Board’s competences, diversity and effectiveness, the Nomination and Governance Committee decided to retain an executive search firm. As a result of these search efforts, the Nomination and Governance Committee proposed that Ms Marjan Oudeman be elected to the Board at the AGM 2018. As proposed by the Nomination and Governance Committee, the AGM elected ten members, including Marjan Oudeman, to UPM’s Board of Directors for a one-year term. As this is, unlike in many other countries, a market practice in Finland, the shareholders were asked to vote on a single slate of directors. The Nomination and Governance Committee also believes that this practice helps to ensure that the Board works well as a whole and comprises sufficiently diverse members with mutually complementing experience and versatile expertise, and thereby the qualifications and competence to discharge Board duties effectively. The directors elected to the Board are presented on pages 92–93. Their term will end upon closing of the AGM 2019. The new director Ms Marjan Oudeman (born 1958) is a Dutch citizen and holds master’s degrees in law (LL.M.) and business

administration (MBA). Ms Oudeman has extensive professional experience in leading multinational business operations for AkzoNobel NV, Tata Steel Europe, Corus Group Plc. and Hoogovens Group NV. During her over 30-year career in these corporations, she has gained valuable experience in performance improvement, financing and financial reporting, restructuring, strategic planning, organisational development and corporate governance. Ms Oudeman ended her work career as President of the Executive Board of the Utrecht University in 2017 to concentrate on her non-executive director positions in SHV Holdings NV, Solvay SA and Aalberts Industries NV, where she also chairs the Audit Committee. Currently she is also a Board member in Novolipetsk Steel PJSC and a member of the Supervisory Board in Het Rijksmuseum. Ms Oudeman’s previous positions of trust include Board membership in Statoil ASA (now Equinor ASA) and Supervisory Board memberships in ABN AMRO Bank, the Dutch Railways and Concertgebouw. BjörnWahlroos, Chairman of UPM’s Board of Directors and the Nomination and Governance Committee, stated that Ms Oudeman contributes to the Board’s competence base and diversity and has helped the Board to implement its refreshment strategy. Mr Wahlroos also said that he has “full confidence that Ms Oudeman will augment the Board’s ability to address the needs of UPM’s evolving businesses and strategy with her versatile expertise and long professional experience”. Board diversity The Board diversity aspects are defined in its Diversity Policy and include relevant professional experience and education, gender, age, nationality and length of tenure. This policy is available at www.upm.com/ governance. Information on the directors’ professional backgrounds and other significant commitments is available on pages 92–93 of this report. Information on the other aspects of Board diversity is available enclosed. Read more on UPMBoard diversity,

related objectives and results obtained in our Corporate Governance Statement 2018, available at www.upm.com/governance. Director independence The Board of Directors evaluates the independence of its members annually and, in addition to this, on a continuous basis with the assistance of the Board’s Nomination and Governance Committee. The directors’ independence is assessed based on the Finnish Corporate Governance Code’s independence criteria and other factors and circumstances to be taken into account in the overall evaluation from both the standpoint of the company and the directors. The majority of directors shall be independent of the company, and at least two directors of this majority shall be independent of significant shareholders. Evaluation of director candidate independence is an important factor when the Nomination and Governance Committee prepares its annual proposal for the composition of the Board. The committee assesses directors’ independence continuously and reviews a report on any changes in the directors’ professional

engagements and other commitments in every meeting to ensure compliance with the independence criteria. It also assesses potential effects of such changes on the directors’ availability for Board work, and reports to the Board on the outcome of such assessments. The committee pays special attention to directors’ positions in other publicly listed companies to make sure that the directors adhere to best practices related to overboarding. According to the committee’s assessments, the changes that took place in 2018 had no effect on the directors’ independence or availability for Board work. The directors’ commitment and availability for Board work is evidenced by the directors’ high attendance at the Board and committee meetings (see the table on the following page). According to the evaluation carried out by the Board with the assistance of the Nomination and Governance Committee, all Board members are independent of the company’s significant shareholders, as the company has no controlling shareholder and none of the company’s shareholders has announced a holding of 10% or more of the company’s shares or votes attached thereto. The Board has also assessed that all non-

RELEVANT PROFESSIONAL EXPERIENCE

Financial expertise

Relevant industry knowledge

INDUCTION OF NEW DIRECTOR MARJAN OUDEMAN

International experience

Marjan Oudeman was elected to our Board of Directors in April 2018. Her induction into UPM began prior to her election, when she was provided with information on our business operations, management system and organisation, as well as our governance principles, corporate policies and charters relevant for board work. Her post-election induction sessions began soon after the Annual General Meeting and continued throughout the year. Since April, Marjan Oudeman has had nine sessions with our executives and other members of the senior management team. In September, she had a two-day trip to Lappeenranta, Finland, where she visited our integrated operations at UPM Kaukas and took a tour of the forest. Following her trip, Ms Oudeman said that it had been a great way to experience and get a good understanding of UPM’s core activities and meet people in the organisation. Pirkko Harrela, Executive Vice President, Stakeholder Relations, hosted her visit to Kaukas. Marjan Oudeman’s induction will continue in 2019 in accordance with our director induction plan, which is available on our corporate website.

Risk management experience

Governance and leadership experience

Experience in the planning and implementation of company strategies