UPM Annual Report 2019

CASE

JAAKKO NIKKILÄ KNOWS SPECIALTY PAPERS Jaakko Nikkilä assumed the role of Executive Vice President for UPM Specialty Papers and member of Group Executive Team in the beginning of July. He started his UPM career in 1995 at Tervasaari specialty paper mill as development engineer and production manager. He also worked in the mill’s technical customer service. The mill’s two label base paper machines became familiar already then. From Tervasaari, the work took him to Asia. Nikkilä was responsible for specialty paper sales in Asia Pacific. Prior to his current position, Jaakko Nikkilä was leading UPM Specialty Papers’ European and North American operations. He and his family lived for several years in Hong Kong and Shanghai. “Hong Kong was a great experience. All our label papers came from Finland at that time. Our goal was to expand our business so that building of a specialty paper machine in China would become feasible. Ten years later, paper machine 3 started up at the UPM Changshu mill. I consider it one of our team’s greatest accomplishments in recent years,” he notes. There have also been challenges along the way, such as increasing global competition, at times unstable global economy and constantly changing market conditions. Yet Nikkilä sees that global megatrends provide favorable long-term opportunities for UPM Specialty Papers. “Our strategy is clear, and we have great opportunities for profitable business growth based on our global customer reach, recent investments and exciting product development initiatives.”

Executive management Jussi Pesonen has been the President and Chief Executive Officer of UPM-Kymmene Corporation since January 2004. According to his service agreement, Jussi Pesonen was entitled to retire in November 2020 at the age of 60. At the request of the company’s Board of Directors, he will continue as the President and CEO (stock exchange release on 24 October 2019). Jussi Pesonen has also been a member of the company’s Board of Directors since March 2007. He has informed the Board

addition to its regular duties, the committee reviewed, among others, the following topics during the year: • Update of UPMCode of Conduct (approved by the Board in April) • Board training (arranged in 2019) • Succession planning and continuance of the President and CEO’s Service Agreement (approved by the Board in October, more information on the next page) • Implementation of the amended EU Shareholders’ Rights Directive • Preparation of remuneration policy for governing bodies • Amendments to the Board and committee charters (approved by the Board in December) In 2019, the Nomination and Governance Committee began its annual review of the composition of the Board in May by discussing, among others, UPM’s overall needs for the Board’s stewardship in terms of the company’s strategic agenda, development stage and relevant emerging trends. In this context, the committee also considered the Board’s potential development needs and the succession planning of its members. The Committee concluded that search efforts would be started to find candidates who could meaningfully contribute to the Board’s competences, diversity and overall renewal and decided to retain an executive search firm to assist in screening appropriate candidates. As a result of these search efforts, the Nomination and Governance Committee has proposed that Emma FitzGerald and Martin à Porta be elected as newmembers of the Board at the AGM2020. Of the incumbent directors Suzanne Thoma and Jussi Pesonen will not be available for re-election. The Nomination and Governance Committee’s proposal on the composition of the Board in 2020 and the Board’s assessment of the director nominees’ independence is available on the corporate website at upm.com/agm2020.

that he will not be available for re-election to UPM’s Board of Directors in the Annual General Meeting of 2020 (stock exchange release on 24 October 2019). The President and CEOmanages and oversees the company’s day-to-day business operations. In practice, the President and CEO chairs the Group Executive Team, Strategy Team and Business Area Boards and makes decisions on matters that are relevant to the company’s daily business operations at the meetings of these management bodies. The compositions of these management bodies are presented in the table below.

Remuneration Committee Duties and responsibilities of the Remuneration Committee are related to the preparation of the company’s remuneration principles and practices and to the remuneration and succession planning of the President and CEO as well as other senior executives. In 2019, the committee held five meetings. In addition to its regular duties, the committee was involved, among others, with the following topics in these meetings: • Implementation of the amended EU Shareholders’ Rights Directive • Preparation of remuneration policy for governing bodies • Amendments to the terms and conditions of the company’s short- and long-term incentive schemes • Amendments to the committee charter (approved by the Board in December) In accordance with the Remuneration Committee’s amended charter, the Remuneration Committee assists the Board in preparing the remuneration policy for the governing bodies and reviews its appropriateness at least annually. In addition, the committee assists the Board in preparing the remuneration report on an annual basis and presents both the policy and the report to shareholders at the general meeting. The Remuneration Policy will be presented to shareholders at the AGM 2020 for the first time. The Remuneration Committee will prepare a remuneration report for the financial year 2020 to be presented to shareholders at the AGM2021 (readmore on page 110). Nomination and Governance Committee The Nomination and Governance Committee is responsible for the composition, diversity and remuneration of the Board of Directors and for corporate governance. When needed, the committee also identifies individuals who are qualified to serve as the President and CEO. In 2019, the committee held five meetings. In

Management responsibilities Members of the Group Executive Team have primary responsibility for the business areas and global functions that they lead. These areas of responsibility are shown in the illustration below. The composition of the Group Executive Team changed during the year as Bernd Eikens, Executive Vice President of UPM Specialty Papers, was appointed Executive Vice President of UPMBiorefining as of 1 March and Jaakko Nikkilä his successor as Executive Vice President of UPM Specialty Papers as of 1 July (read more on the left).

COMPOSITION OF MANAGEMENT BODIES

Read more on our management system in the CG Statement 2019 and at upm.com/ governance. Members of the Group Executive Team, including information on the executives’ biographical details, professional and educational backgrounds, other significant commitments and shareholdings in the company, are presented on pages 114–115 of this report.

GROUP EXECUTIVE TEAM BUSINESS AREA BOARDS STRATEGY TEAM President and CEO (Ch.) President and CEO (Ch.) President and CEO (Ch.) CFO CFO CFO General Counsel General Counsel General Counsel Business area EVPs Business area EVP EVP Strategy EVPs of global functions EVPs of global functions EVP Technology

RESPONSIBILITY AREAS OF THE MEMBERS OF THE GROUP EXECUTIVE TEAM

PRESIDENT AND CEO JUSSI PESONEN

CFO 1)

UPM Biorefining

Tapio Korpeinen

Bernd Eikens

General Counsel

UPM Energy

Juha Mäkelä

Tapio Korpeinen

Strategy

UPM Raflatac

Kari Ståhlberg

Antti Jääskeläinen

UPM Specialty Papers

Technology 2)

Jyrki Ovaska

Jaakko Nikkilä

Human Resources

UPM Communication Papers

Riitta Savonlahti

Winfried Schaur

Stakeholder Relations 3)

UPM Plywood

Pirkko Harrela

Mika Sillanpää

1) Incl. Finance & Control, Treasury, IR, IT, Sourcing and Real Estate (incl. Finnish forest assets) 2) Incl. Investment Management, R&D, new business development (biochemicals, biocomposites) 3) Incl. Communications & Brand, Responsibility, Public & Media Relations

GO VERNANCE 108

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UPM ANNUAL REPORT 2019

UPM ANNUAL REPORT 2019

GOVERNANCE

CONTENTS