Helsinki, June 14, 2012 – The Disciplinary Committee of NASDAQ OMX Helsinki (the “Exchange”) has imposed a warning to Finnair Plc (trading code: FIA1S) due to the breach of the Rules of the Stock Exchange. The company did not follow the recommendations of the Finnish Corporate Governance Code regarding disclosure of the remuneration of the managing director and other executives. The Corporate Governance Code is part of the Rules of the Stock Exchange and hence binding on the listed companies.
Finnair Plc disclosed its Annual Financial Report for the year 2011 on March 7, 2012. In the remuneration statement included in the report, the company announced it had paid special bonuses for 18 key individuals on February 15, 2011. The total sum of these benefits was approx. 2.8 million euro of which approx. 1.3 million euro share was directed to the six persons belonging to the Executive Board of the company. Finnair Plc stated that the special bonuses were based on the decision by the Board of Directors on September 29, 2009. The purpose of these special bonuses was to commit the Executive Board members and certain other key individuals to the company during the transfer period related to the President and CEO change between autumn 2009 and year 2011. According to the information received from the company, these one-time bonuses were set up to ensure the continuity of the company’s operations.
Pursuant to an article published on Helsingin Sanomat (leading Finnish newspaper) on March 15, 2012, Finnair Plc omitted to disclose a financial benefit of 180,000 euro paid to the President and CEO Mika Vehviläinen in 2009.
The Finnish Corporate Governance Code 2008 was effective at the time the decisions on the benefits were made. Nevertheless, that Code is in line with the current Corporate Governance Code 2010 as regards the remuneration of the managing director and other executives.
According to the Corporate Governance Code, the company shall disclose the principles for the remuneration schemes concerning the managing director and other executives (Recommendation 45 in Corporate Governance Code 2010, Recommendation 43 in Corporate Governance Code 2008). Furthermore, detailed information of the financial benefits of the Managing Director shall be disclosed (Recommendation 46 in Corporate Governance Code 2010, Recommendation 44 in Corporate Governance Code 2008). An updated remuneration statement by the company shall be made available on its website (Recommendations 55 and 47 in Corporate Governance Code 2010, Recommendation 52 in Corporate Governance Code 2008).
The Disciplinary Committee stated that the special bonuses paid to the Executive Board members shall be considered such financial benefits the principles of which shall be disclosed. Also the decision-making process of the benefits shall be disclosed. When deciding whether a matter should be disclosed, the paid benefits shall be evaluated from the perspective of the main principles of the Corporate Governance Code, transparency and the aim to increase the investor information. The bonuses have been relevant for the investors’ evaluation on enhancement in the shareholder value of the company and on the operations of the company in general. The name of the benefit is not decisive: the principles for both non-variable and variable remuneration shall be disclosed pursuant to the Corporate Governance Code.
The Disciplinary Committee considered that the principles and decision-making process for the special bonuses should have been disclosed on the company’s website. Furthermore, in conjunction with the introduction of the Corporate Governance Code 2010, the company should have disclosed the information on remuneration statement available on the company’s website. The company did not disclose the benefits paid for the Executive Board members until spring 2012.
Furthermore, the Disciplinary Committee stated that the remuneration paid to the President and CEO shall be considered a financial benefit to be disclosed pursuant to the Corporate Governance Code, irrespective of whether the term of the President and CEO relationship has started at the time when decision on remuneration was made or remuneration paid. Finnair Plc should have disclosed the financial benefit paid to Mika Vehviläinen on the company’s website.
When considering the sanction, the Disciplinary Committee stated that the value of the undisclosed benefits was substantial. Despite the Corporate Governance Code is to some extent subject to interpretation, the level of the failures in the company’s obligations was of that kind that the company shall not be discharged from the liability. The company had neglected the key requirements of the Corporate Governance Code.
The Disciplinary Committee found that Finnair Plc violated the Rules of the Stock Exchange by not disclosing information about the remuneration of the management director and other executives as required in the Corporate Governance Code, and imposed a warning to the company.
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Their Disciplinary Committees of NASDAQ OMX Helsinki and NASDAQ OMX Stockholm may, in case of a breach by the member or a listed company, resolve to fine the member or a listed company. The paid fine is transferred to the NASDAQ OMX Nordic Foundation for the promotion of the foundation’s objective, which is to promote scientific research of the financial markets in Finland and Sweden, providing impetus for increased competence and competitiveness for these financial markets. Two of the directors of the Foundation shall have extensive academic experience within the field of financial markets.
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