UPM Annual Report 2019

Board diversity – age

Board diversity – nationality

Board diversity – tenure

Board diversity – education

Board diversity – gender

Board of Directors The Board carries the main responsibility for the governance of the company, with the focus on overseeing the long-term value creation of UPM. To fulfil its role effectively, the Board: • Sets the company’s strategic objectives • Reviews and approves financial and other plans relevant to the achievement of these objectives and • Reviews the management’s performance in terms of meeting these objectives. The Board’s other main responsibilities relate to the integrity of the company’s financial reporting, the effectiveness of internal control and risk management systems, and the appointment, remuneration and succession planning of the company’s senior management. Committee proposed to the AGM2019 that all incumbent directors be re-elected to the Board. This proposal was based on the committee’s careful and thorough consideration of the Board’s performance, effectiveness, independence, diversity and balance of relevant director attributes in relation to the requirements set by the company’s strategic direction and evolving operations. As proposed by the Nomination and Governance Committee, the AGM re-elected all ten incumbent directors to UPM’s Board of Directors for a one-year term. The shareholders were asked to elect a single slate of directors as this is, unlike in many other countries, a market practice in Finland. The Nomination and Governance Committee also believes that this practice helps to ensure that the Board works effectively as a whole and comprises sufficiently diverse members with varied experience and versatile areas of expertise Board composition The Nomination and Governance

Dutch, 10% Norwegian, 10% Swiss, 10% Finnish, 70%

< 5 years, 30% 5–10 years, 30% > 10 years, 40%

MBA or Executive MBA, 3 LL.M., 2 Ph.D. (Econ.), 1 B.Sc. (Econ.), 1 M.Sc. (Econ.), 1 M.Sc. (Eng.), 1 General Staff Officer, 1 Ph.D. (Chem. Eng.), 1 BA (Business Admin.), 1 BA (Business Econ.), 1

50–59, 40% 40–49, 10% 60–69, 50%

30%

70%

two directors of this majority shall be independent of any significant shareholders. Evaluation of director candidates’ 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 on a continuous basis 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. The committee also assesses how such changes may affect the directors’ availability for Board work, and reports to the Board the outcome of such assessments. In particular, the committee assesses directors’ positions in other publicly listed companies to ensure that the directors adhere to the best practices related to overboarding. According to the committee’s assessments, the changes that took place in 2019 had no effect on the directors’ independence and hadmainly positive effects on their availability for Board work. The directors’ commitment and availability for Board work is evidenced by the directors’ high attendance at Board and committee meetings (see the table on the next 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-executive directors are independent of the company, including Berndt Brunow, Veli-Matti Reinikkala and Björn Wahlroos, who have been non- executive directors of the company for more than ten consecutive years. Based on the Board’s overall evaluation of these directors’ independence, their independence is not compromised due to their long service history, and no other factors or circumstances have been identified that could impair their independence. As the President and CEO of the company, Jussi Pesonen is not independent of the company. Board work in 2019 The Board held 11 meetings in 2019. There is no minimummeeting attendance requirement for Board members. Instead, Board members are expected to attend all

that mutually complement each other. The composition of the Board is presented in the table below. The directors’ termwill end upon closing of the AGM2020. Board diversity The Board diversity aspects are defined in the Diversity Policy of the Board 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 112–113 of this report. Information on the other aspects of Board diversity is available in the pie charts above. More information on UPMBoard diversity, related objectives and results obtained is available in our CG Statement 2019. Director independence The Board of Directors evaluates the independence of its members both annually and – with the assistance of the Board’s Nomination and Governance Committee – on an ongoing basis. The directors’ independence is assessed based on the independence criteria of the Finnish CG Code. The majority of directors shall be independent of the company, and at least

meetings unless there is a valid reason for not attending. The average attendance of the Board members at the Board meetings was 96.4% (2018: 100%) and at the committee meetings 97.8% (2018: 92.9%). The personal attendance rates of each Board member are presented in the table below. In connection to its meetings, the Board also held non-executive sessions and non-executive sessions with the auditor. responsibilities, the Board reviewed and approved updated strategic plans during its strategy session inMay. The main focus areas of the UPMBiofore strategy continue to be performance, growth, innovation, responsibility and portfolio development. This strategy is enhanced by the brand promise: Beyond Fossils (read more on pages 14–31). An essential part of the Board’s annual strategy work is to review and assess strategic and operational risks and opportunities. These risks and opportunities and their impact on operations and strategy are described on pages 28–29. In 2019, the Board continued to focus its strategic review on the Uruguay Strategic focus areas in 2019 In line with its main duties and

RELEVANT PROFESSIONAL EXPERIENCE

Financial expertise

Relevant industry knowledge

International experience

Risk management experience

Governance and leadership experience

Experience in the planning and implementation of company strategies

BOARD COMPOSITION IN 2019

ATTENDANCE AT BOARD AND COMMITTEE MEETINGS 2019

ATTENDANCE/ NO. OF BOARD MEETINGS

ATTENDANCE/NO. OF COMMITTEE MEETINGS

AVERAGE ATTENDANCE %

DIRECTOR SINCE

NO. OF TERMS

AGE (AT THE END OF 2019)

INDEPENDENCE OF THE COMPANY

NON-EXECUTIVE / EXECUTIVE DIRECTOR

ATTENDANCE %

ATTENDANCE %

DIRECTOR

DIRECTOR

Björn Wahlroos (Chair)

2008 2002 2015 2013 2018 2007 2014 2007 2015 2012

12 18

67 69 50 44 61 59 68 62 57 59

Independent Independent Independent Independent Independent Independent Independent Independent Independent

NED NED NED NED NED NED NED NED NED ED

Björn Wahlroos (Board and NGC Chair) Berndt Brunow (Deputy Chair, NGC member)

11/11 11/11 10/11 11/11 11/11 11/11 11/11 11/11

100 100 90.9 100 100 100 100 100 81.8 90.9

5/5 5/5 4/5 5/5 5/5 5/5 5/5 5/5 5/5 –

100 100

100 100 87.5 100 100 100 100 100 87.5 93.8

Berndt Brunow (Deputy Chair)

Henrik Ehrnrooth Piia-Noora Kauppi Marjan Oudeman Jussi Pesonen * )

5 7 2

Henrik Ehrnrooth (RC member) Piia-Noora Kauppi (AC Chair) Marjan Oudeman (AC member) Ari Puheloinen (NGC member) Veli-Matti Reinikkala (RC Chair) Suzanne Thoma (RC member) Jussi Pesonen

80

100 100

13

Non-independent

–

Ari Puheloinen

6

100 100 100 100

Veli-Matti Reinikkala Suzanne Thoma * )

13

5 8

9/11

Kim Wahl

Kim Wahl (AC member)

10/11

*) Not available for re-election at the AGM 2020.

NGC – Nomination and Governance Committee, RC – Remuneration Committee, AC – Audit Committee

GOVERNANCE 104

GOVERNANCE 105

UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

CONTENTS