VR operates in accordance with the Finnish Companies Act
VR Group’s parent company is VR-Group Ltd, which is a limited company owned entirely by the Finnish state and subordinated to the Ministry of Transport and Communications. The company was established in 1995 to continue the operations of Finnish State Railways (VR) and for this purpose was given the state assets that were legally owned by VR according to a decree of the Council of State (the Finnish government). The Finnish state still directly owns the rail network and continues to be responsible for its administration. The Finnish Rail Administration, a civil service department subordinate to the Ministry of Transport and Communications, performs the practical tasks relating to administration.
Annual General Meeting
The financial year of the Group and Group companies is the calendar year. The Annual General Meeting is held every year within six months of the end of the financial year, on a date specified by the Board of Directors.
Supervisory Board
According to the company’s current Articles of Association, VR-Group Ltd’s Supervisory Board comprises at least 6 and at most 12 members. The Articles of Association were amended in 2008, when the number of members was reduced from 22 to 12.
The Chairman and members of the Supervisory Board are elected by the Annual General Meeting. A person aged 68 years or older may not be elected as the Chairman or as a member of the Supervisory Board.
The Supervisory Board elects a Deputy Chairman from among its members. The term of office of the Chairman and members of the Supervisory Board is one year. The Annual General Meeting decides on the remuneration of the members of the Supervisory Board.
The Supervisory Board’s duties include ensuring that the company’s affairs are managed in compliance with sound business principles, with good profi tability as the aim, and in accordance with the Articles of Association and the decisions of the Annual General Meeting.
The Supervisory Board reviews the financial and annual plans, which include proposals for substantial changes to the main service offering, and monitors
the implementation of these plans. The Supervisory Board gives the Board of Directors instructions on matters of wide-ranging or fundamental significance, and submits an opinion on the financial statements and the auditors’ report to the Annual General Meeting.
Supervisory Board met seven times during the review
year, with an attendance rate of 83%.
The Chairman and members of the Supervisory Board are elected by the Annual General Meeting. A person aged 68 years or older may not be elected as the Chairman or as a member of the Supervisory Board.
The Supervisory Board elects a Deputy Chairman from among its members. The term of office of the Chairman and members of the Supervisory Board is one year. The Annual General Meeting decides on the remuneration of the members of the Supervisory Board.
The Supervisory Board’s duties include ensuring that the company’s affairs are managed in compliance with sound business principles, with good profi tability as the aim, and in accordance with the Articles of Association and the decisions of the Annual General Meeting.
The Supervisory Board reviews the financial and annual plans, which include proposals for substantial changes to the main service offering, and monitors
the implementation of these plans. The Supervisory Board gives the Board of Directors instructions on matters of wide-ranging or fundamental significance, and submits an opinion on the financial statements and the auditors’ report to the Annual General Meeting.
Supervisory Board met seven times during the review
year, with an attendance rate of 83%.
Board of Directors
According to the Articles of Association, the company’s Board of Directors comprises a chairman as well as at least four (4), and at most eight (8), members who are elected annually by the Annual General Meeting.
A person aged 68 years or more may not be elected the Chairman or a member of the Board of Directors. The Board of Directors elects a deputy chairman from among its members.
In 2008 the Board of Directors comprised a Chairman, a Deputy Chairman and six members. One of the members is a VR personnel representative; the others are not employees of VR. The Annual General Meeting decides on the remuneration of members of the Board of Directors.
The Board of Directors is responsible for managing the administration of the company and for the proper arrangement of its business activities, for appointing and dismissing its President and Deputy President and
deciding on their remuneration, and for preparing the matters to be put before the Annual General Meeting and the Supervisory Board. The Board of Directors also handles other administrative duties that it is required
to perform under the Finnish Limited Liability Companies Act if these are not separately assigned to the Supervisory Board or the President.
The Board met 14 times, with an attendance rate of 93%.
A person aged 68 years or more may not be elected the Chairman or a member of the Board of Directors. The Board of Directors elects a deputy chairman from among its members.
In 2008 the Board of Directors comprised a Chairman, a Deputy Chairman and six members. One of the members is a VR personnel representative; the others are not employees of VR. The Annual General Meeting decides on the remuneration of members of the Board of Directors.
The Board of Directors is responsible for managing the administration of the company and for the proper arrangement of its business activities, for appointing and dismissing its President and Deputy President and
deciding on their remuneration, and for preparing the matters to be put before the Annual General Meeting and the Supervisory Board. The Board of Directors also handles other administrative duties that it is required
to perform under the Finnish Limited Liability Companies Act if these are not separately assigned to the Supervisory Board or the President.
The Board met 14 times, with an attendance rate of 93%.
Committees of the Board of Directors
The Board of Directors has formed two committees from among its members: the appointment and remuneration committee, and the audit committee. The term of office of these committees is one year. The term of office starts at the appointment of the committee after VR-Group Ltd’s Annual General Meeting and lasts until the following Annual General Meeting.
The committees convene 4–5 times a year. The rules of procedure for the committees have been confirmed by the Board and the committees report to the Board of Directors. The main tasks of the appointment and remuneration committee are matters relating to the selection and remuneration of the Group’s senior management. The main tasks of the audit committee are matters relating to financial reporting, especially the company’s financial statements and interim reports, internal control and risk management.
The committees convene 4–5 times a year. The rules of procedure for the committees have been confirmed by the Board and the committees report to the Board of Directors. The main tasks of the appointment and remuneration committee are matters relating to the selection and remuneration of the Group’s senior management. The main tasks of the audit committee are matters relating to financial reporting, especially the company’s financial statements and interim reports, internal control and risk management.
President and Board of Management
The President of VR-Group Ltd is also the Chief Executive Officer (CEO) of VR Group. VR-Group Ltd has a Board of Management that comprises the President and CEO (chairman), the Presidents of VR Ltd and VR-Track Ltd, and also VR-Group Ltd’s Chief Financial Officer (CFO), Director, Administration, Director, Development, and Director, Corporate Communications & PR.
The Board of Management addresses matters of strategic or other major importance for VR’s business operations, drafts plans and monitors their implementation, and manages more important daily activities and operative issues. The Board of Management generally convenes once a week.
The Board of Management addresses matters of strategic or other major importance for VR’s business operations, drafts plans and monitors their implementation, and manages more important daily activities and operative issues. The Board of Management generally convenes once a week.
Incentive schemes
VR-Group has two incentive schemes: a management bonus scheme and a personnel bonus scheme. A personnel fund was formed in 2007 for the personnel bonus scheme. Persons in senior management do not belong to the personnel fund. The bonus is based on the operating profit of the individual company (weighting about 50%) and 2-3 quality targets for individual business units (weighting about 50%), and the bonus is transferred to the personnel fund. In addition, some Group companies have used personnel bonus schemes that are based on elements such as meeting targets, the level of service and customer satisfaction.
VR Group’s incentive bonus scheme covers about 397 people in senior management positions. The scheme includes short-term and long-term elements. The short-term incentives are based on achieving operating profit targets for the individual company and the Group as well as 3–4 targets for the business unit or individual.
The Group’s Board of Directors after confirming the budget each year decides on the profitability target for the individual company and for the Group as well as on the profitability indicator, which has been operating profit. The Group’s administration confirms which jobs fall within the scope of the short-term element of the bonus scheme.
The long-term incentive is based on VR Group’s return on equity (ROE). The Board of Directors confirms the bonus scales of the long-term incentive and other principles for determining bonus payments for the following three-year period. The appointment and remuneration committee confirms which jobs fall within the scope of the long-term incentive scheme.
A maximum bonus potential has been set for the management incentive bonus such that the maximum bonus, if all targets are met, can be 15-80 % of the annual salary, depending on a person’s responsibilities.
VR Group’s incentive bonus scheme covers about 397 people in senior management positions. The scheme includes short-term and long-term elements. The short-term incentives are based on achieving operating profit targets for the individual company and the Group as well as 3–4 targets for the business unit or individual.
The Group’s Board of Directors after confirming the budget each year decides on the profitability target for the individual company and for the Group as well as on the profitability indicator, which has been operating profit. The Group’s administration confirms which jobs fall within the scope of the short-term element of the bonus scheme.
The long-term incentive is based on VR Group’s return on equity (ROE). The Board of Directors confirms the bonus scales of the long-term incentive and other principles for determining bonus payments for the following three-year period. The appointment and remuneration committee confirms which jobs fall within the scope of the long-term incentive scheme.
A maximum bonus potential has been set for the management incentive bonus such that the maximum bonus, if all targets are met, can be 15-80 % of the annual salary, depending on a person’s responsibilities.
Auditing and risk management
According to the Articles of Association the company has at least two and at most five auditors. One auditor must be an auditor or firm of Authorised Public Accountants certified by the Central Chamber of Commerce and the others must be certified auditors.
The company currently has two auditors. The term of office of an auditor ends at the close of the Annual General Meeting following the auditor’s election.
The Group has an internal audit unit. Its duties are to examine Group companies and assess whether their internal control is appropriate and effective, their operations are effective, risk management is adequate, financial and operative information is valid and accurate, assets are protected, and whether the companies comply with legislation, regulations and internal guidelines. The operating principles for the internal audit are defined in the operating procedures. The Board of Directors of VR-Group Ltd approves the operating procedures and the annual plan of operations for the internal audit.
The internal audit unit is subordinate to the President and CEO and reports to the Board’s audit committee. VR Group’s internal audit unit observes international professional and ethical standards. The internal audit unit employs five auditors.
Parliamentary State Auditors have the right to receive sufficient information from VR Group for the performance of their duties. The State Audit Office has the right to audit VR, especially in respect of how the state has exercised ownership steering and its shareholder rights.
The risk management policy confirmed by VR-Group Ltd’s Board of Directors states that the company must ensure that risks do not arise from its operations that could have negative consequences are out of proportion to the profit from operations or to its risk-bearing capacity. The Chief Executive Officer is responsible for arranging risk management in the Group. The presidents and managing directors of companies are responsible for risk management in their companies. The Group does not have a separate risk management organization. Risk management is the responsibility of the executive management of each group.
Risks for the Group and the Group’s companies aredefined and prioritized in annual risk surveys, and VR has drafted risk management programmes to address them. Annual risk analyses are conducted to address larger risks. Risk surveys and risk monitoring results are reported to VR-Group Ltd’s Board of Directors.
The company currently has two auditors. The term of office of an auditor ends at the close of the Annual General Meeting following the auditor’s election.
The Group has an internal audit unit. Its duties are to examine Group companies and assess whether their internal control is appropriate and effective, their operations are effective, risk management is adequate, financial and operative information is valid and accurate, assets are protected, and whether the companies comply with legislation, regulations and internal guidelines. The operating principles for the internal audit are defined in the operating procedures. The Board of Directors of VR-Group Ltd approves the operating procedures and the annual plan of operations for the internal audit.
The internal audit unit is subordinate to the President and CEO and reports to the Board’s audit committee. VR Group’s internal audit unit observes international professional and ethical standards. The internal audit unit employs five auditors.
Parliamentary State Auditors have the right to receive sufficient information from VR Group for the performance of their duties. The State Audit Office has the right to audit VR, especially in respect of how the state has exercised ownership steering and its shareholder rights.
The risk management policy confirmed by VR-Group Ltd’s Board of Directors states that the company must ensure that risks do not arise from its operations that could have negative consequences are out of proportion to the profit from operations or to its risk-bearing capacity. The Chief Executive Officer is responsible for arranging risk management in the Group. The presidents and managing directors of companies are responsible for risk management in their companies. The Group does not have a separate risk management organization. Risk management is the responsibility of the executive management of each group.
Risks for the Group and the Group’s companies aredefined and prioritized in annual risk surveys, and VR has drafted risk management programmes to address them. Annual risk analyses are conducted to address larger risks. Risk surveys and risk monitoring results are reported to VR-Group Ltd’s Board of Directors.