UPM Annual Report 2022

GOVERNANCE

UPM

BEYOND FOSSILS

BUSINESSES

RESPONSIBILITY

ACCOUNTS FOR 2022

on the selection criteria, Ernst & Young Oy became the Committee's preference and recommended audit firm for the financial year 2024 with Deloitte Oy as the second ary option. The Board agreed with these proposals and has made corresponding proposals to the AGM 2023. According to PricewaterhouseCoopers Oy, Authorised Public Accountant Mikko Nieminen will continue as the lead audit partner for the financial year 2023. Ernst & Young Oy has informed that Authorised Public Accountant Heikki Ilkka would act as the lead audit partner for the financial year 2024. Remuneration Committee The Remuneration Committee is respon sible for preparing the Company’s remu neration principles and practices, as well as planning the remuneration and succession of the President and CEO and other senior executives. In 2022, the Committee held four meetings. In addition to the Remuneration Committee’s assigned matters and regular reports as listed above, it also discussed the performance measures of the incentive plans and made recommendations to the Board concerning the terms of planning the remuneration and succession of the Presi dent and CEO and other senior executives. Following the Remuneration Committee’s recommendation, the Board decided to define three ESG-related performance measures (page 28) in the new performance share plan (PSP 2022–2024).

re-election. The Nomination and Governance Committee’s proposal on the composition of the Board in 2023, along with the Board’s assessment of the independence of potential Board members, is available on the corporate website at www.upm.com/agm2023. 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 at the age of 60. At the request of the Company’s Board of Direc tors, he continues as the President and CEO and has announced that he will exercise his right to retire from UPM during 2024. The schedule allows UPM’s Board of Directors sufficient time to implement the succession planning process. The President and CEO’s duty is to manage and oversee the Company’s day to-day business operations in accordance with the instructions and orders given by the Board of Directors. In the oper ative management of the Company, the President and CEO is assisted by the Group Executive Team, consisting of the executives leading business areas and global functions, the Business Area Boards and the Strategy Team. The President and CEO makes decisions on matters that are relevant to the Company’s daily business operations. The President and CEO chairs the Group Executive Team. The compo sitions of these management bodies are presented in the table on the right.

Nomination and Governance Committee

COMPOSITION OF MANAGEMENT BODIES

Read more on our management system in the Corporate Governance Statement 2022 and at www.upm.com/governance. Members of the Group Executive Team, includ ing information on the executives' biographical details, professional and educational back grounds, other significant commitments and shareholdings in the Company, are presented on pages 114–115.

The Nomination and Governance Committee is responsible for the composition, diversity and remuneration of the Board of Directors and corporate governance. If necessary, the Committee also identifies individuals who are qualified to serve as the President and CEO. In 2022, the Committee held five meetings. In addition to the Nomination and Gover nance Committee’s assigned matters and regular reports as listed above, it also focused on extraordinary measures for the AGM pursuant to the Finnish temporary Legisla tive Act (375/2021) prevailing at that time. The Committee further focused on the search for a director and the succession plan for the Board and its Chair, as the latter announced in connection to the AGM 2022 that the com mencing term would be his last as Chair. The Nomination and Governance Com mittee conducted its annual review of the structure, size, composition, diversity and succession needs of the Board as a whole. This included whether the Board reflects an appropriate balance of sound judgement and a diverse range of business expertise, skills, experience, independence, availabil ity of service to the Company and other desired qualities. As a result of careful research and selection efforts, the Nomination and Governance Committee has proposed that Pia Aaltonen-Forsell be elected as a new member of the Board at the AGM 2023. Of the incumbent directors, Björn Wahlroos, the Chair of the Board, will not be available for

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 Business area EVPs

General Counsel Business area EVP

General Counsel

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 Fibres 4)

Tapio Korpeinen

Bernd Eikens

General Counsel

UPM Energy

Juha Mäkelä

Tapio Korpeinen

Strategy

UPM Raflatac

Kari Ståhlberg

Antti Jääskeläinen

UPM Specialty Papers

Technology 2)

Jaakko Nikkilä

Winfried Schaur

Human Resources

UPM Communication Papers

Riitta Savonlahti

Massimo Reynaudo

Stakeholder Relations 3)

UPM Plywood

Mika Kekki

Pirkko Harrela

1) Incl. Finance & Control, Treasury, IR, IT, Sourcing and Real Estate (incl. Finnish forest assets) 2) Incl. Investment Management, R&D and UPM Biorefining business unit (UPM Biofuels, UPM Biochemicals, UPM Biomedicals and UPM Biocomposites) 3) Incl. Communications & Brand, Responsibility, Public Affairs 4) Incl. UPM Pulp and UPM Timber

paid an annual base of EUR 140,000 and that other members of the Board being paid EUR 115,000. The AGM further resolved that the remuneration of the Remuneration Committee Chair would be raised and that other annual Committee fees payable to the members of the Board of Directors’ Com mittees would remain unchanged. The approved annual fees and total remuneration of each Board member, as well as the number of shares purchased, are presented in the tables on the next page. Board members did not receive any other financial benefits for their Board or Commit tee membership in addition to the annual base and Committee fees. Travel and accom modation expenses incurred from meetings held elsewhere than in a director’s place of residence were paid against invoice. Shares purchased for the Board members in 2022 may not be transferred for two years from the purchase date (27 April 2022) or until the membership of the respective Board member has ended, whichever occurs first.

out the framework for the remuneration of the Company’s governing bodies and is available on the corporate website at www. upm.com/governance. Remuneration of the members of the Group Executive Team and information about the Company’s short and long-term incentive schemes and plans, as well as the terms and conditions of the aforemen tioned executives’ service agreements, is available on the corporate website at www. upm.com/governance. Remuneration of the Board of Directors At the AGM 2022, in accordance with the Nomination and Governance Committee’s proposal, it was decided that the remuner ation of the Chair of the Board of Directors would be raised so that the Chair of the Board will be paid an annual base fee of EUR 200,000. The remuneration of the Deputy Chair of the Board and the other members of the Board remains unchanged, with the Deputy Chair of the Board being

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 on the right. Remuneration In accordance with the CG Code, we have published our Remuneration Report for the financial year 2022. The Remuneration Re port and information on the remuneration of the Group Executive Team members is available on the corporate website at www. upm.com/governance. The Remuneration Report for govern ing bodies presents the remuneration of the directors and the President and CEO and has been prepared by the Board of Directors’ Remuneration Committee and Nomination and Governance Commit tee. The Remuneration Report 2022 for governing bodies will be presented at the AGM 2023. The Remuneration Policy sets

CASE

NEW CYBERSECURITY PROGRAMME LAUNCHED

Although our work on cybersecurity is based on continuous development, UPM launched a new cybersecurity improvement programme in 2022. The programme aims to prevent and mit igate cyber-risks, safeguard business continuity and protect against the misuse of our systems, networks and technologies. The programme consists of eight solution streams and will run from 2022 to 2025. The programme’s initial steps involve critical

service and process identification, which will be followed by several organisational and technical cybersecurity improvements. The programme is regularly reported to UPM's audit committee, which monitors the progress in its meetings. Renewed employee training on detecting and reporting cybersecurity incidents will begin in 2023.

Cybersecurity has become more important than ever before given the current geopoliti cal situation. In a networked world, potential attacks and consequences could also impact UPM’s operations. Changing technology and regulations also require effective cyber-risk mitigation.

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UPM ANNUAL REPORT 2022

UPM ANNUAL REPORT 2022